Emeritus Closes $66M, Five-Property Buy

Emeritus financed the transaction with mortgage debt of $45.6 million, seller-provided financing of $10 million, a net refund of $8.7 million of security deposits required under the original leases and the balance from cash on hand. The mortgage financing is comprised of a $25.9 million loan at a fixed rate of 5.97% and a term of 10 years, and a $19.7 million loan at a monthly variable rate of LIBOR plus 4%, with a LIBOR floor of 2.75%, and a term of three years.

Emeritus' strategy is to buy leased assets in transactions that are, at a minimum, cash flow neutral, and that create value over time "by eliminating rent escalators and capturing the full future upside potential of these properties." The acquisition from Ventas increases Emeritus' portfolio of owned properties to 164, or 61.2% of the total consolidated portfolio now consisting of 268 communities. All told, Emeritus operates 26,700 units in 302 communities in 36 states.

In October, Emritus closed on the balance of a purchase of 29 communities from Health Care REIT Inc. and affiliates. The communities were formerly operated by Emeritus under long-term leases. The initial closing was completed on June 30, 2008, and consisted of 19 communities with a capacity of 1,564 units. The final closing consisted of 10 communities with a capacity of 693 units for a purchase price of $77.2 million, excluding financing and closing costs.

Financing for the 10 facilities consists of $56.4 million of mortgage debt financing, of which $29 million is at a weighted average fixed rate of 6.654% and was originated by KeyBank through a Freddie Mac credit facility, and $27.4 million of variable rate debt provided by KeyBank at the one-month LIBOR rate plus 3%. The Freddie Mac credit facility has a term of 10 years. The KeyBank loan has a term of three years and may be prepaid without penalty.