Deutsche Bank is securitizing a $710 million mortgage backed by a portfolio of 155 skilled nursing, assisted and independent living facilities with 18,870 licensed beds, in 20 states.
The borrower, SAVA Senior Care, used loan proceeds to refinance existing debt on the properties, pay closing costs, fund upfront reserves, and cash out $182.5 million of equity.
The interest-only loan has an initial term of 24 months but allows for three 12-month extensions. In addition to the first mortgage, the property is encumbered by two mezzanine loans totaling $240 million, a $96 million revolving credit facility secured by accounts receivable, as well as $174.2 million in notes among various company affiliates which are fully subordinate to the mortgages
Of the 155 skilled nursing facilities included in the collateral for the trust, 137 were part of a portfolio of properties acquired by the sponsor from Mariner Healthcare in 2004 in a transaction valued at $1.3 billion and securitized in COMM 2014-SAVA; another 14 properties were acquired in January 2014 from a former partner following successful litigation and securitized in COMM 2014-FL5. The remaining four properties were acquired unencumbered by operating leases in October 2013 during the course of the partnership litigation, but were not included in the earlier CMBS financings as their performance had declined.
Morningstar and Standard & Poor’s both expect to assign triple-A ratings to the senior tranche of notes to be issued in the transaction.
Among its key credit considerations cited by Morningstar in its presale report are the dependence of the operating business on Medicare and Medicaid payments, state and federal licensing requirements, a lack of diversification of asset types, and the fact that the property is so highly leveraged that “it is unclear how much equity remains.”
On the plus side, according to Morningstar, are the geographic diversity of the portfolio of properties and the fact that there is a limited supply of such healthcare facilities.