CareTrust REIT, Inc. announced that it purchased three CCRCs in Los Angeles, Orange and San Diego counties. Together, the communities comprise 475 assisted living, skilled nursing and memory care beds/units. The incoming operator for each is Bayshire Senior Communities, an existing CareTrust tenant based in Southern California. The investments were funded using cash on hand and came to around $60 million, or $126,900 per bed/unit.
Torrey Pines Senior Living is in San Diego, California, and was acquired for a total investment amount of approximately $32.3 million, inclusive of transaction costs. Annual cash rent for the first year is about $2.6 million, increasing to around $3.0 million in the second year with CPI-based annual escalators thereafter.
Meanwhile, the acquisition of the communities in Los Angeles and Orange counties was completed through a joint venture between CareTrust (the managing member) and a third-party regional healthcare real estate investor. CareTrust provided a combined common equity and preferred equity investment amount totaling approximately $28.0 million.
The communities are being leased to Bayshire pursuant to a new, triple-net master lease agreement with an initial term of 15 years and two, five-year extension options. CareTrust’s initial contractual yield on its combined preferred and common equity investments in the joint venture is approximately 9.1%. Agreed upon annual increases to base rent and to CareTrust’s preferred rate of return increase CareTrust’s contractual yield to 9.7% and 10.2% in years two and three, respectively. Commencing in year four, contractual base rent increases by a fixed 2% annually.
