Business Specialties Investments
July 2, 2008
By: Scott Baltic, Contributing Editor
Senior citizens naturally tend to slow down, but two new deals are further evidence that the senior housing sector is as active as ever.
In one transaction, Care Investment Trust Inc. has made a $100.8 million purchase of a portfolio of 12 Midwestern seniors facilities. In the other, Five Star Quality Care Inc. has purchased three assisted-living facilities in Pennsylvania and New Jersey for $21.4 million and will take over operation of seven others.
In the first deal, Care, which is externally managed and advised by CIT Healthcare L.L.C., a subsidiary of CIT Group Inc., has acquired the 12 senior housing facilities from Bickford Senior Living, an affiliate of Eby Realty Group. Care made the purchase through its Care YBE Subsidiary LLC. Under a master lease, an affiliate of Bickford will lease the properties for 15 years with four 10-year renewal options, and each facility will continue to be subleased to its original seller/operator.
The portfolio, which was developed and managed by Bickford, comprises 569 units in Illinois (five facilities), Indiana (one), Iowa (five) and Nebraska (one). All were built in the last 11 years, and they’ve had aggregate occupancy levels of more than 90 percent during 2006 and 2007.
Care funded the purchase with cash on hand and approximately $74.6 million in mortgage financing from Fannie Mae. The mortgages will mature in seven years, are interest-only for the first year and carry a fixed annual rate of 6.845 percent.
Founded in 1991, Bickford currently operates 37 senior living communities in the Midwest: 13 owned by Bickford, 23 operated under long-term lease agreements and one managed only.
In the second transaction, Five Star Quality Care bought three properties from Senior Housing Properties Trust, though the transaction isn’t that simple. The backstory is that in 2003, SNH had purchased 10 assisted-living facilities in Pennsylvania and New Jersey and totaling 873 units for about $87.6 million. The properties were simultaneously leased to NewSeasons Assisted Living Communities Inc., a subsidiary of Independence Blue Cross.
NewSeasons and IBC later decided to leave the assisted-living business. Under a new agreement negotiated among SNH, Five Star, NewSeasons and IBC, Five Star is purchasing three of the 10 properties and acquiring operation of the other seven, which SNH continues to own. Five Star will assume NewSeasons’s and IBC’s lease obligations to SNH, in consideration for which NewSeasons will pay Five Star $10 million in cash.
The purchased units total 259 units and the leased total 614, and the portfolio has an average occupancy rate of 82 percent. Other than a possible small capital gain, the transaction is expected to be financially neutral to SNH. Five Star is funding the purchase of the three properties with the $10 million from NewSeasons, plus cash on hand.
By: Scott Baltic, Contributing Editor
Senior citizens naturally tend to slow down, but two new deals are further evidence that the senior housing sector is as active as ever.
In one transaction, Care Investment Trust Inc. has made a $100.8 million purchase of a portfolio of 12 Midwestern seniors facilities. In the other, Five Star Quality Care Inc. has purchased three assisted-living facilities in Pennsylvania and New Jersey for $21.4 million and will take over operation of seven others.
In the first deal, Care, which is externally managed and advised by CIT Healthcare L.L.C., a subsidiary of CIT Group Inc., has acquired the 12 senior housing facilities from Bickford Senior Living, an affiliate of Eby Realty Group. Care made the purchase through its Care YBE Subsidiary LLC. Under a master lease, an affiliate of Bickford will lease the properties for 15 years with four 10-year renewal options, and each facility will continue to be subleased to its original seller/operator.
The portfolio, which was developed and managed by Bickford, comprises 569 units in Illinois (five facilities), Indiana (one), Iowa (five) and Nebraska (one). All were built in the last 11 years, and they’ve had aggregate occupancy levels of more than 90 percent during 2006 and 2007.
Care funded the purchase with cash on hand and approximately $74.6 million in mortgage financing from Fannie Mae. The mortgages will mature in seven years, are interest-only for the first year and carry a fixed annual rate of 6.845 percent.
Founded in 1991, Bickford currently operates 37 senior living communities in the Midwest: 13 owned by Bickford, 23 operated under long-term lease agreements and one managed only.
In the second transaction, Five Star Quality Care bought three properties from Senior Housing Properties Trust, though the transaction isn’t that simple. The backstory is that in 2003, SNH had purchased 10 assisted-living facilities in Pennsylvania and New Jersey and totaling 873 units for about $87.6 million. The properties were simultaneously leased to NewSeasons Assisted Living Communities Inc., a subsidiary of Independence Blue Cross.
NewSeasons and IBC later decided to leave the assisted-living business. Under a new agreement negotiated among SNH, Five Star, NewSeasons and IBC, Five Star is purchasing three of the 10 properties and acquiring operation of the other seven, which SNH continues to own. Five Star will assume NewSeasons’s and IBC’s lease obligations to SNH, in consideration for which NewSeasons will pay Five Star $10 million in cash.
The purchased units total 259 units and the leased total 614, and the portfolio has an average occupancy rate of 82 percent. Other than a possible small capital gain, the transaction is expected to be financially neutral to SNH. Five Star is funding the purchase of the three properties with the $10 million from NewSeasons, plus cash on hand.
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