Omega agrees to buy MedEquities Realty Trust in a cash and stock deal worth $632 million plus assumed debt.

I hope everyone had a good break these past few days. Everyone, that is, except the folks at Omega Healthcare Investors and MedEquities Realty Trust (MRT).

Omega announced today that it is buying MedEquities in a stock and cash transaction valued at about $633 million plus $265 million of net debt. Shareholders are receiving a very healthy 50% premium.

MRT owns 34 facilities in seven states with 2,755 beds run by 10 different operators. About 75% of the beds are skilled nursing with some assisted living, and the remainder is a smattering of LTACs, IRFs, behavioral health and an MOB.

The REIT’s share price had been trading near its low, and EBITDAR coverage for the SNFs has been about 1.1x on a facility level, but 2.55x on the guarantor level. The coverage on the other assets has been much healthier. The largest tenant with 1,138 beds was OnPointe, but they were replaced by Creative Solutions in Healthcare in a re-tenanting that should be effective this month.

It is difficult for REITs this small to remain competitive, especially when they have tenant problems. The price to Omega seems high on a per bed basis despite it being accretive, but at least they get some added tenant diversification.

With this deal starting the year off, it may be a little bit of a rollercoaster ride in 2019. Happy New Year.