Irvine-based Sabra Health Care REIT Inc. has completed the previously revealed transactions described below.
Sale of Senior Care Centers Facilities
On April 1, 2019, the company completed the sale of 28 facilities previously operated by Senior Care Centers, generating gross sales proceeds of $282.5 million, which it expects to use to repay borrowings under our revolving credit facility. In addition, in connection with the closing of the sale of these facilities and pursuant to the previously revealed settlement agreement we entered into with Senior Care Centers, we received $5 million of the $9.5 million of total settlement payments concurrently with such closing.
Seven of the remaining 10 facilities operated by Senior Care Centers are expected to be leased to a current operator in the Sabra portfolio under a 12-year triple-net master lease effective on or about May 15, 2019, generating initial annual cash base rents of $5.7 million with provisions allowing Sabra opportunities to periodically reset base rent as the value of these properties increase during the subsequent period of stabilization. The remaining three facilities (two of which are currently non-operational) are expected to be sold in the coming months and will generate no continuing rental revenues for the Company. These transactions, along with the previously announced settlement agreement, will end Sabra’s relationship with Senior Care Centers.
On April 1, 2019, the company completed the conversion of its 21-community Holiday portfolio from a triple-net master lease to a management agreement structure. In connection with the conversion, the company terminated its Holiday master lease and concurrently entered into management agreements pursuant to which Holiday will manage the Holiday Communities. In exchange for terminating the master lease, the company by received $57.2 million of total cash consideration, which it expects to use to repay borrowings under its revolving credit facility.
As previously disclosed, the management fee to be paid to Holiday pursuant to the Holiday Management Agreements will be equal to a monthly base fee in the amount of 5% of revenues during the first year of the term of the Holiday Management Agreements. After the first year, the management fee will be equal to the Base Management Fee plus an incentive fee based on the growth in EBITDAR after capital expenditures for the Holiday Communities above agreed upon performance thresholds. The Holiday Management Agreements have a one-year term with one-year extensions at Sabra’s option.
The above transactions were contemplated in the REIT’s 2019 earnings guidance issued on February 24, 2019.