Sabra Health Care REIT (Nasdaq: SBRA) is expanding its presence in Canada, and growing its senior living footprint, through a joint venture with Sienna Senior Living (TSX: SIA).
In an effort to focus more on its long-term and home health care segments, Extendicare on Thursday announced it would sell its 11 Esprit senior living communities to the Sienna-Sabra JV for $307.5 million Canadian dollars, or about $243 million.
The California-based REIT and Canadian operator will be 50-50 partners in the venture.
“We have had a longstanding relationship with the Sienna team and after evaluating several investments over the years we are pleased to deepen our strategic relationship through the pending acquisition of a high-quality senior housing portfolio with substantial scale,” Talya Nevo-Hacohen, CIO of Sabra, said in a statement.
Sabra and Sienna’s asset management and operating skillsets will help the partnership improve performance and create value at Esprit properties, Nevo-Hacohen added.
Extendicare, a Canada-based senior care operator, will effectively leave the retirement living segment once the transaction closes in the second financial quarter.
Extendicare currently employs 23,500-plus staff for its 120 long-term care homes and senior living communities – 69 are operated by Extendicare and 51 are managed via contract services.
Comprising 1,048 retirement living suites, the Esprit facilities are located in Ontario and Saskatchewan, Canada. Year-to-date as of Sept. 30, average occupancy for ten of the facilities was 90%; the 11th property was recently constructed and in lease-up, Sabra said in its statement.
The Esprit communities are expected to have a 6% yield in the first year.
“We are repositioning Extendicare to focus on growth in our long-term care and home health care segments where we can leverage our deep expertise and scale to drive improved performance and high-quality care for seniors across Canada,” Extendicare President and CEO Dr. Michael Guerriere said in a statement.
Proceeds from the sale will go toward providing more flexibility for strategic capital allocation, Guerriere said in the statement, including investments in staff, technology and a long-term care redevelopment program.
Sienna and Sabra will continue day-to-day facility operations during the transition, Extendicare said.
Existing debt associated with the portfolio is $172.4 million, with an estimated debt prepayment cost of approximately $6.3 million to be repaid at closing; the transaction is structured on a debt-free basis.
The implied realized capitalization rate on stabilized net operating income for the transaction is 6% – estimated net proceeds on the sale, including debt repayments, taxes, closing adjustments and transactions costs, is $115 million.
CBRE Capital Markets was the financial advisor for Extendicare, while Bennett Jones LLP served as the operator’s legal advisor.
Of its 447 investments in skilled nursing, senior housing and specialty hospitals, Sabra is reporting as of September 2021 that its portfolio is made up of 10.6% and 8.2% senior housing leased and managed properties, respectively.
Companies featured in this article:
Bennett Jones LLP, CBRE Capital Markets, Extendicare, Sabra Health Care REIT, Sienna Senior Living
