Sabra expands relationship with Meridian through two preferred equity investments

Sabra Health Care REIT has completed two preferred equity investments.

The company will provide up to USD7.2m of preferred equity funding to an affiliate of Meridian Realty Advisors for the construction of a 141-bed skilled nursing facility and a 52-unit memory care facility in Austin, Texas.

The company funded USD4.3m at closing. In addition, the company received an option to purchase the skilled nursing facility on or after the earlier to occur of the facility achieving and maintaining 90 per cent occupancy for three consecutive months, or 36 months after receiving the certificate of occupancy for the facility. The company also received an option to purchase the memory care facility that is not expected to be exercised as it is subordinate to a purchase option given to the manager of the memory care facility. Upon exercise of the purchase option on the skilled nursing facility, the company would expect to lease the facility to Meridian under a long-term, triple net lease.

The company's preferred equity investment with respect to the skilled nursing facility provides for an annual 15 per cent preferred rate of return, which will accrue on a quarterly compounding basis with payment of the preferred return deferred until the earlier of the closing under the purchase option, or 18 months after receiving a certificate of occupancy for the facility. The company's preferred equity investment with respect to the memory care facility provides for an annual 15 per cent preferred rate of return, which will accrue on a quarterly compounding basis with payment of the preferred return deferred until the earlier of the closing under the purchase option (whether by the manager of the facility or by the company), or 30 months after receiving a certificate of occupancy for the facility.

Rick Matros, chief executive and chairman, says: "We're pleased to do yet another deal with the Meridian team and are currently working on a longer term pipeline agreement with them. Although we do not expect to be able to exercise our purchase option on the memory care facility, the preferred return on this facility investment made it compelling to provide capital for that development while benefiting the long term relationship we have developed with the Meridian team."

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