National Health Investors, Inc. (NYSE: NHI) entered into an agreement to finance the development of a 144-bed skilled nursing facility near Milwaukee, a $25.35 million commitment with a 9.5% initial yield.
Under NHI’s commitment, initial funding totaled $4.7 million. The yield earned during construction will be capitalized into NHI’s investment, according to a statement announcing the real estate investment trust’s (REIT) involvement in the project. Construction is in progress, with an expected completion date sometime in the second quarter of 2020.
The facility, called Ignite Medical Resort Oak Creek, will be operated by a tenant entity owned by affiliates of Villa Healthcare and Ignite Medical Resorts; the parties will enter into a 12-year lease term with two 10-year renewals and a 2% annual escalator.
It is the first time all three entities — NHI, Ignite, and Villa Healthcare — have worked together, Villa president Ben Israel told Skilled Nursing News, though executives with Ignite and Villa have long-standing relationships. The new SNF, which is located in Oak Creek, Wis., is the second facility on which Ignite and Villa have partnered.
Villa provides several back-office services for Ignite, according to Ignite CEO Tim Fields, and that arrangement will continue in the new venture — with Ignite dealing with day-to-day operations and Villa handling such functions as accounting and billing. But Villa is no stranger to SNF operations; the company has a portfolio of 35 facilities, primarily in Minnesota and Michigan, with three in the state of Wisconsin.
“This was a project that Villa had anticipated doing on its own,” Israel noted, adding that the bed licenses for the property came from Kindred Healthcare, which exited the SNF market last year. “We had initially purchased the beds from Kindred and then went to go identify some land to build the nicest and the newest facility in the state of Wisconsin.”
But pulling off new development in the metropolitan Milwaukee area is difficult, Fields noted. Villa, which was adding facilities in other states as it worked on developing the Oak Creek facility, decided to partner with Ignite because of the latter’s expertise in high-acuity patients and care, he added.
Ignite, which recently held a grand opening for a new luxury- and short-term-focused facility in Kansas City, also operates a facility in Niles, Ill. — about 75 miles south of Milwaukee — and several others in the pipeline. Its Niles facility has a strong relationship with the non-profit health system Advocate Health Care, Israel noted, which puts the new Wisconsin facility in a strong position.
“Advocate just took over Aurora St. Luke’s Medical Center, which is right down the street from us,” Fields said. “So we get to work with the same medical group and executive teams that we’ve been working with in Chicago.”
The Oak Creek building will have the usual specialties for Ignite’s short-term rehab program, with a focus on orthopedic, cardiac, and stroke care, Fields told SNN. But it will also have in-house dialysis, “which is very unique in Wisconsin,” he noted.
There will also be an inpatient hospice unit, in partnership with Seasons Hospice, Israel said. And he stressed that the companies’ shared goal is to provide a high level of care to the region.
“Our focus is solely on making people better,” he said. “I think that’s really our united vision, whether it be our residents or our employees — that we can make that happen, changing what is known as the norm in long-term care and setting the bar that much higher.”
Written by Maggie Flynn