March 24, 2021, Ben Swett, The SeniorCare Investor - In the March issue of The SeniorCare Investor, we wondered when REITs would become net-buyers in the senior care M&A market, after several years of massive divestments. There are clearly some good deals available out there for value-add properties, and if there has been any softening in prices, those bargains may extend to stabilized communities too.
Sabra Health Care REIT announced in its fourth quarter earnings call that it plans on spending approximately $1.5 billion on acquisition opportunities, with the majority allocated to be seniors housing assets. A couple of transactions have now trickled out, and sure enough, both involved seniors housing properties selling for a combined $28 million.
First, in Augusta, Georgia, the REIT purchased a stabilized assisted living/memory care community from the original developer, CR Properties. Featuring 100 units, the community opened in late-2018 and was already nearly 90% occupied at the time of closing in early March. Claiborne Senior Living had managed the community since the opening and will continue to do so under a new management agreement with Sabra. The transaction was underwritten with an initial cash yield of nearly 8.0%.
And second, Sabra acquired a vacant seniors housing community in Gulf Breeze, Florida, with plans to spend up to $3 million to convert the building into a 60-bed addiction treatment center. Simultaneously with the acquisition, Sabra added the facility to an existing triple-net master lease with Landmark Recovery for an initial 15-year term and initial cash yield of 9.0%, escalating annually at the greater of CPI or 2.0%. This is the fifth addiction treatment facility that Landmark Recovery currently leases from Sabra.