Global Medical REIT Inc. has completed the acquisition of four inpatient rehabilitation facilities from affiliates of CNL Healthcare Properties Inc. for an aggregate purchase price of $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.” 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.