Global Medical REIT has acquired four inpatient rehabilitation facilities from affiliates of CNL Healthcare Properties for $94 million, with an initial capitalization rate of approximately 7.3% and an estimated second-year capitalization rate of 7.6%, assuming the scheduled lease increases.
Jeffrey Busch, Chief Executive Officer, Chairman & President stated, “This acquisition is a testament to our disciplined underwriting and the value creation we are able to achieve through our net-lease medical portfolio. We believe the rent generated by this acquisition, in combination with the underlying cash flows generated through our existing real estate portfolio, are essential to creating a sustainable dividend and long-term stockholder value.” Mr. Busch concluded, “In addition, we are pleased with the accordion closing and appreciate the support our lenders provide to our long-term business and investment strategy.”
The IRF Portfolio is comprised of four inpatient rehabilitation facilities aggregating 207,204 square feet and leased to leading healthcare providers under long-term triple-net leases. Currently, all four leases have a weighted average remaining lease term of approximately 8.3 years and are expected to provide total annual rent of $6.9 million.
Additional details regarding the leases are as follows:
- Las Vegas, Nevada (Encompass Health)
Comprised of 53,260 square feet with current annual rent of approximately $1.5 million, or $28.24 per square foot, and contains four, five-year renewal options, which are subject to rental rate increases equal to CPI (subject to a 15% cap) every five years, with the next increase due to go into effect in June 2020.
- Surprise, Arizona (Joint Venture between Cobalt Rehabilitation and Tenet Healthcare)
Comprised of 54,575 square feet with current annual rent of approximately $2.0 million, or $36.12 per square foot, and contains two five-year renewal options, which are subject to rental rate increases equal to the greater of (i) 2.0% or (ii) CPI (subject to a 3% cap) every year, with the next increase due to go into effect in January 2020.
- Oklahoma City, Oklahoma (Joint venture between Mercy Health and Kindred Healthcare)
Comprised of 53,449 square feet with current annual rent of approximately $1.9 million, or $35.02 per square foot, and contains three ten-year renewal options, which are subject to 2.5% rental rate increases every year, with the next increase due to go into effect in October 2019.
- Mishawaka, Indiana (St. Joseph’s Health System)
Comprised of 45,920 square feet with current annual rent of approximately $1.5 million. or $31.89 per square foot and contains two, five-year renewal options, which are subject to 2% rental rate increases every year, with the next increase due to go into effect in January 2020.
On April 15, 2019, the Company exercised $75 million of the $150 million accordion feature of its credit facility. The partial exercise of the accordion feature increases the term loan component of the credit facility from $100 million to $175 million and the total borrowing capacity under the credit facility to $425 million.
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