SavaSeniorCare Moves 29-Asset Portfolio to Four New Tenants in Robust Financing Market

With the skilled nursing market hotter than ever, SavaSeniorCare recently moved a 29-asset long-term care portfolio in a deal that Erik Howard, executive managing director of Capital Funding Group, said was one of the more complicated ones the financial provider has completed this year.

The deal included a $262.6 million term loan for the refinancing of a 29-asset long-term care portfolio which transitioned to four new regional operators. 

Howard said the most challenging piece of the deal was underwriting the tenant transition from the one operator, Sava, to four new regionally-focused operators that now become tenants on the same underlying real estate portfolio and loan.

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“Rarely do we have more than one tenant on a loan,” he said.

The portfolio spans across Colorado, California and Wyoming and includes 28 skilled nursing facilities and one joint skilled nursing and assisted living facility, with a total of 3,140 beds.

“The deal came with significant deal structuring complications as we worked through covenants and other items related to each of the four tenants,” Howard said. “It also presented challenges with the state-by-state change of ownership with different operators transitioning at different times.”

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Getting all the parties on the same page, between a single landlord, five tenants, including SAVA, and CFG, presented complications as well.

“Part of the motivation of the transaction was (a) to allow for the operating company transitions and the new leases and (b) to put in place a more flexible loan that would allow the real estate owner to pursue a HUD exit,” Howard explained.

SavaSeniorCare previously announced these divestitures last year.

The deal comes during a busy year for the Capital Funding Group which included a record-setting milestone in the month of June and more than $2 billion in deals in the first half of the year.

“While many lenders were on the sidelines in 2020 and early 2021, the CFG approach and philosophy did not waiver during COVID,” Howard said.

He said CFG looks to continue to support the industry and be there for borrowers and operators when they need capital the most.

“We did that in a big way,” Howard added.

While this deal was an acquisition, and the price per bed valuations “were very reasonable,” he felt that the pandemic essentially “reversed the script” and lessened the concern investors have about reimbursement risk in the skilled nursing industry.

“All of the various stimulus programs both at the federal and state level have highlighted the essential nature of the SNF industry,” he said. “In addition, we continue to see a robust financing market and low interest rates, which makes it an attractive industry for investment even if buyers are paying less than the traditional 12-13% capitalization rates, particularly if you are able to lock down permanent financing with HUD and do not take interest rate risk on the refinance of your bridge loan.”

Editor’s Note: An error was made regarding the owner of the real estate in this deal. The landlord is a private real estate investment group that was not disclosed to Skilled Nursing News. We regret the error.

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