Ventas SNF spin-off gets in the game

Just a couple of weeks after Care Capital Properties officially was spun out from Ventas and began trading on the New York Stock Exchange, the newly formed post-acute/skilled nursing facility REIT announced its first acquisition, and it was a big one. With eight skilled nursing facilities and one assisted living community and 1,174 beds in the Shreveport, Louisiana market, the portfolio featured an average occupancy of 88% and a 47% quality mix. Also included in the portfolio was a rehab therapy company, four hospice agencies and an interest in an affiliated pharmacy provider. CCP will triple-net lease the portfolio to pursuant to a 15-year master lease containing annual rent escalations and two five-year renewal options. CCP paid $190 million, or about $161,800 per bed, and also made a $20 million five-year fully amortizing loan to Texas-based operator Senior Care Centers (which will operate the portfolio under a triple net master lease) at a rate of LIBOR plus five percent, which escalates every year by 25 basis points. The 15-year master lease contains annual rent escalations and two five-year renewal options, with an initial cash yield of 8.25%. Initial EBITDARM coverage is expected to be approximately 1.7x, which translates to a 14.0% EBITDARM cap rate. As a result of the transaction, SCC will account for approximately 16% of CCP’s net operating income on a pro forma basis.