As 2014’s fourth-quarter gets underway and speculation on the timing of interest rate hikes by the Federal Reserve abounds, senior housing providers and investors continue to take advantage of today’s low interest rates by acquiring additional senior housing assets to boost their portfolios. Before the Federal Reserve does move to raise interest rates and the cost of capital increases across the board, parties that are seeking capital to acquire senior housing assets should contact Cambridge Realty Capital to learn more about the different financing options it offers for acquisitions and other purposes.

Sale/Leasebacks Are Used to Strengthen Portfolios

The Maryland-based real estate investment trust, Sabra Health Care REIT, recently announced that it completed the purchase of 21 independent living properties from affiliates of Holiday Acquisition Holdings Corporation (“Holiday”). Sabra paid $550 million for the properties, which are located in 15 states. At the same time that it acquired these properties, Sabra also leased them back to another affiliate of Holiday, and a Holiday affiliate will also operate the properties under a management agreement with the leaseholder.

Pursuant to the terms in Sabra’s agreement with the leaseholder, the portfolio should generate an initial yield on cash rent of 5.5 percent and $39.3 million in annual lease revenues. These revenues are significant, and Sabra’s management team is excited, as evidenced by comments that Sabra’s CEO and Chairman Rick Matros made about the deal. Specifically, Mr. Matros stated that, “This acquisition is transformational for Sabra. Our profile moves significantly in line with our stated goals including diversification of our asset base into private pay senior housing and continued reduction of our exposure to our largest tenant.” Mr. Matros also noted the attractiveness of sale/leaseback transactions when he stated that, “We also expect to close approximately $100 million in sale/leaseback transactions over the next 60 days reflective of our typical bread and butter deals with capitalization rates consistent with what we have discussed for smaller transactions.” Mr. Matros’ comments make it clear that Sabra Health Care views sale/leasebacks as a formidable tool in enhancing its portfolio. Sabra is not the only entity that feels this way: an Orlando-based firm also demonstrated an affinity for sale/leasebacks in a deal that it just consummated.

CNL Lifestyle Properties, Inc. recently purchased two assisted living communities in Georgia, and is leasing them back to the properties’ operator, Oaks Senior Living. Both properties are relatively new, as the Oaks at Post Road Cumming was built in 2007 and the Oaks at Braselton was built just a few years later in 2011. And although they contain 110 assisted living units between them and are technically considered assisted living properties, they also contain 70 memory care units that CNL believes will generate premium rates relative to those generated by the assisted living units. This is because of the additional care that the facilities provide for their dementia residents, and the additional charges that are associated with that care.

Sale/leasebacks are an attractive option for many buyers. In addition to acquiring the asset itself and the value that it holds, companies can also generate significant revenue from the agreement with the leaseholder. Financing for sale/leasebacks is just one of the many services that Cambridge Realty Capital offers for senior housing transactions. Accordingly, senior housing participants who are interested in obtaining capital for a sale/leaseback or for other purposes should contact the firm to learn more about this option and the others that it offers as well.

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