Mezzanine financing helps fund new construction
Contemporary Healthcare Capital is helping to finance Medical Development Corp.’s (MDC) new Canterfield brand of assisted living/memory care communities in the Southeast. Currently there are two Canterfield communities open, one in Oak Ridge, Tennessee and one in Forsyth County, Georgia. But there are six more coming, including one in Kennesaw, Georgia. For that project, which should cost around $17 million, or approximately $182,800 per unit to build, Contemporary is providing a $3.1 million four-year mezzanine loan with a rate in the mid-teens, while State Bank and Trust (a local bank with locations across Georgia) is providing a $12.45 million loan with a rate of LIBOR plus 300 basis... Read More »High cost memory care development in Florida
It’s not often you see a new senior living development cost over $400,000 per unit to build. Nevertheless, Cypress Cove Health Park Florida, a not-for-profit CCRC built in 1999 with currently more than 550 residents on 48 acres in Fort Myers, Florida, is adding 44 memory care units for a cost of approximately $18.5 million, or about $420,500 per unit (in a state that averages $213,000 per unit to build new assisted living/memory care or standalone memory care communities, according to our data). The new two-story building, scheduled to open in 2016, will feature four households each with 11 private apartments that each average about 250 square feet. There will be a significant amount of... Read More »How HCP Will Deal With Its Largest Tenant
HCP plans to sell up to 50 HCR ManorCare SNFs, but will it really work? The REIT HCP announced in February that it will try to sell up to 50 of its HCR ManorCare skilled nursing facilities to try to improve on the property level lease coverage ratio that is below 1.0x. The way it is going to work is that HCP will credit the annual lease payments in an amount equal to 7.75% of the sales proceeds. Using an example of a current 0.80x lease coverage on a facility to be sold, if it sold at a market cap rate of 12% to 12.5%, there would be no improvement in lease coverage. In fact, the coverage would decline slightly, so HCP would really not be any better off. One equity analyst did the math and... Read More »Looking for Yield in Health Care REITs
Even with the threat of rising interest rates, there are long-term benefits to investing in health care REITs. Last week, there was some noise from the Federal Reserve that they may start increasing interest rates a little sooner than most people expected. Well, that sent most health care REIT stocks tumbling, many by 4% to 5% that day. Yes, REITs have been riding high for a while, but where else can you find dependable yields in the 4.5% to 7.0% range? Is now a good time to invest in health care REITs? For a short-term investor, I would say no, because the interest rate risk is reasonably high for the remainder of the year. For long-term investors? The yield on your cost basis is only... Read More »Schedule a demo
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