Care Capital Properties Buys $400M Behavioral Health Portfolio

The six properties, located in California, Arizona and Illinois, will be leased back to affiliates of Signature Healthcare Services, the seller.
Care Capital Properties' Newly Acquired Portfolio
Care Capital Properties’ Newly Acquired Portfolio

Care Capital Properties Inc. has closed the acquisition of six behavioral health hospitals in a sale-leaseback transaction with affiliates of Signature Healthcare Services LLC for $400 million. The facilities, totaling 712 beds, are located in California, Arizona and Illinois. The purchase of one of the buildings, worth roughly $20 million, can only be finalized in the last quarter of 2018. The new owner will fund up to $50 million in capital expenditures for future expansion and upgrades of the properties.

The assets will be leased on a ten-year triple-net basis, with five renewals of five years each. The initial rent rate for all the properties is $32.8 million, equaling a GAAP yield of 8.7 percent. The investment was underwritten at 1.5x EBITDAR coverage on cash rent, while the full-year GAAP accretion is projected to be approximately 13 cents.

The transaction was funded through cash on hand, disposition proceeds and borrowings under the CCP’s revolving credit facility. The health care facilities offer inpatient psychiatric care, intensive outpatient psychiatric care and addiction/detox treatment.

Aurora Vista del Mar Hospital in Ventura, Calif., was built in 1984, has 87 beds and provides veterans counseling. Aurora Charter Oak Hospital in Covina, Calif., built in 1974, has been through a 39-bed expansion completed in 2011. Its total capacity now counts 146 beds. The 80-bed Aurora San Diego Hospital in San Diego was built in 1988 and renovated within the past six months. The property’s outpatient unit was expanded in 2013.

Aurora Arizona West in Glendale, Ariz., is a 100-bed facility built in 1996 and renovated in 2013. Aurora Arizona East in Tempe, Ariz., built in 2001, provides 138 beds after a 63-bed expansion completed in the summer of 2016. The largest facility in the portfolio is Aurora Chicago Lakeshore Hospital in Chicago, built in 1992 and renovated in 2011, offers 161 beds and is University of Chicago’s only academic affiliate for adult psychiatry. The hospital also includes a 60-bed Children’s Pavilion building, redeveloped and opened in 2013.

In addition to these properties, Signature operates eight other acute psychiatric hospitals.

Image courtesy of Care Capital Properties