Prelude Homes & Services has proven to be the gateway to the Minnesota senior living market for CareTrust REIT, which just exercised its option to purchase a second stand-alone memory care community in the Minneapolis-area from Prelude. Three years ago, CareTrust entered the state when it bought Prelude’s three-year old, 28-unit MC community in Woodbury for $7.2 million, or $257,140 per unit. CareTrust leased the community back to Prelude for an initial 15-year term with CPI-based escalators, two five-year renewal options, 8.25% initial cash yield and a lease coverage ratio of 1.3x. The REIT also received a purchase option on a memory care development in White Bear Lake. The Woodbury venture must have been a success, because one year after it opened its 30-unit, high-acuity memory care community in White Bear Lake, Prelude is selling the property to CareTrust for $7.8 million, or $260,000 per unit. The community features three cottages, including one six-bed, all-male building, each with shared dining, TV and sitting areas and an enclosed courtyard. Similar to the Woodbury transaction, Prelude will continue to operate it, adding the community to its existing master lease (which has 12.5 years left on its initial term) with CareTrust. It is expected to generate additional annual cash rent of about $640,000, with an initial cash yield of 8.2%.
CareTrust REIT Grows In Minnesota
