Care Capital to Acquire $400M Hospital Portfolio

The behavioral health hospitals located in California, Arizona and Illinois will be leased to affiliates of Signature Healthcare Services on a ten-year triple-net basis, upon completion of the transaction.
Care Capital Properties' Portfolio
Care Capital Properties’ Portfolio

Care Capital Properties Inc. recently announced that it has entered into an agreement to acquire six behavioral health hospitals, currently owned by affiliates of Signature Healthcare Services LLC, in a sale-leaseback transaction for approximately $400 million and to fund up to $50 million in capital expenditures to finance expansion and improvements in the portfolio. The properties are located in California, Arizona and Illinois and contain a total of 712 beds.

The transaction is expected to be closed in the second quarter of 2017 and will be funded through cash on hand, disposition proceeds and borrowings under the CCP’s revolving credit facility. CCP expects to fund approximately $380 million at closing and will have an option, in the fourth quarter of 2018, to purchase one additional building for an amount that is expected to be approximately $20 million.

The properties will be leased to affiliates of Signature on a ten-year triple-net basis, with five renewals of five years each. The initial GAAP yield on the transaction is expected to be approximately 8.7 percent and 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. Signature has been advised by Goldman, Sachs & Co. in this transaction.

Aurora Vista del Mar Hospital offers 87 beds and is located on a 16-acre site in Ventura, Calif. Part of the portfolio sale are also Aurora Charter Oak Hospital, located in Covina, Calif. and Aurora San Diego Hospital, located in San Diego. Aurora Charter Oak Hospital offers 146 beds and Aurora San Diego Hospital 80 beds.

Located in Chicago, the Aurora Chicago Lakeshore Hospital was built in 1992 and renovated in 2011. The asset offers 161 beds and is University of Chicago’s only academic affiliate for adult psychiatry.

The Arizona properties, part of the portfolio, are Aurora Arizona West, located in Glendale and Aurora Arizona East, located in Tempe. The first property was built in 1996 and renovated in 2013, offering 100 beds and the second property offers 138 beds and was built in 2001.

Signature operates eight other acute psychiatric hospitals and is led by a long-tenured management team with over 150 years of combined industry experience.

This accretive transaction will enable us to efficiently recycle capital from our dispositions and diversify our portfolio into a new industry sector with a strategic operator, favorable investment attributes and strong cash flows,” said Raymond Lewis, CEO of Care Capital Properties, in a prepared statement.

Image courtesy of Care Capital Properties