The fourth quarter earnings season is upon us, and Omega Healthcare Investors announced that it just closed a very significant acquisition. The REIT purchased 24 senior living communities for $510 million, or $199,840 per unit, from Healthpeak Properties. The acquisition included the assumption of an in-place master lease with Brookdale Senior Living for the properties, which are located in 11 states. The concentration is in Oregon (6 states), Texas (6) and Washington (4), with one each in the other eight states.
The annual lease payment is $43.5 million with a 2.4% annual escalator. That results in an 8.5% current lease yield, which is quite attractive, plus those increased escalator payments. In the third quarter it looks as if occupancy was about 81.9% (the most recent financial data we could find), with revenue per occupied room of $5,342 and EBITDARM lease coverage of 1.07x. That is not good if Brookdale is leasing them at just above breakeven before their management fee. The good news, however, is that if we are approaching the bottom in occupancy, the operating performance should start to improve.
It just shows what interesting times we are in, as one REIT is exiting from the seniors housing business, while another is willing to make a sizeable investment in it which will help it diversify from its concentration in the skilled nursing sector. Omega also sold five properties so far in the first quarter for $76 million in cash proceeds, generating a $71 million gain. The REIT also collected over 99% of contractual rent and mortgage payments for the month of January (not too shabby), excluding their tenant Daybreak which is transitioning its portfolio pursuant to a forbearance agreement.
We may find out more about the sale from Healthpeak when it reports its fourth quarter earnings next week, and we would not be surprised to hear about another large sale as it whittles through its seniors housing divestiture program. This is getting interesting.
