Chicago-based Aviv REIT, Inc. (“Aviv” or the “Company”) has entered into a definitive agreement with Diamond Senior Living, LLC, a subsidiary of General Electric Credit Corporation of Tennessee, to acquire 28 properties for $305 million (plus the office building described below).
All of the properties are currently triple-net leased to new Aviv operator Laurel Health Care (“Laurel”) at an initial cash yield of 8.5%, for a remaining term of 15 years. Laurel is headquartered in Westerville, Ohio and has been in the business of operating skilled nursing facilities (“SNFs”) and other healthcare facilities for over 20 years. Laurel operates 42 facilities in 5 states, 28 of which Laurel will now lease from Aviv.
“It is the single biggest acquisition we have made in more than 30 years as investors in the SNF industry,” says Craig M. Bernfield, Aviv’s chairman and chief executive officer. “We have renewed our long standing relationship with GE as a strategic seller and lender in this transaction, as GE is one of the most important players in our industry as an owner and lender to the sector.”
The properties include 23 SNFs, 4 assisted living facilities, one independent living facility, and one office building, located in 5 states. The portfolio consists of 11 facilities in Michigan, 8 facilities in Ohio, 7 facilities in North Carolina, one facility in Virginia and in Indiana, as well as Laurel’s corporate office building in Ohio. Two of the properties are leasehold interests, which have terms expiring in 2025 and 2020, respectively, and both of those properties will be subleased to Laurel until the end of their respective terms.
The Company expects to fund approximately 40% of the purchase price, or $125 million, with cash and its available line of credit and approximately 60% of the purchase price, or $180 million, with a secured loan anticipated to be made by GE, acting through its business unit known as GE Capital, Healthcare Financial Services. The Company expects to have approximately $350 million drawn under its $600 million line of credit after the closing of this acquisition. In connection with the Company’s merger with Omega Healthcare Investor’s, Inc., which the Company publicly announced on Friday, October 31, 2014, the cash portion of the purchase price will be refinanced by various debt and equity offerings executed by Omega in Connection with the combined company’s capital plan.
The Company expects to close the acquisition on or about December 5, 2014, but in no event later than December 31, 2014.