Senior Housing: Omega Closes First Step of CapitalSource Long Term Care Facility Acquisition and Announces $100 Million Term Loan.

Omega Healthcare Investors, Inc. (NYSE: OHI) announced that it has purchased subsidiaries of CapitalSource Inc. (NYSE: CSE) owning 40 long term care facilities and an option to purchase other CapitalSource subsidiaries owning 63 additional facilities for an aggregate purchase price of approximately $294.1 million. This transaction represents the initial closing under the previously announced Securities Purchase Agreement (the “Purchase Agreement”) with CapitalSource and certain of its subsidiaries.

In addition, the Company also announced it closed on a $100 million term loan with General Electric Capital Corporation (“GECC”). $565 Million of New Investments Completed First Closing – On December 22, 2009, the Company purchased entities owning 40 facilities and an Option (the “Option”) to purchase entities owning 63 additional facilities for approximately $294.1 million, consisting of: (i) $184.2 million in cash; (ii) 2,714,959 shares of Omega common stock (valued at $50.6 million under the Purchase Agreement); and (iii) assumption of $59.4 million of 6.8% mortgage debt maturing on December 31, 2011 with a one year extension right.

The 40 facilities owned by the entities acquired on December 22, 2009, representing 5,264 available beds located in 12 states, are part of 15 in-place triple net leases among 12 operators. The 15 leases generate approximately $31 million of annualized revenue.

The Option to acquire entities owning an additional 63 facilities is exercisable for cash consideration of $295.2 million by Omega at any time through December 31, 2011. The 63 facilities owned by the entities subject to the Option, representing 6,529 available beds located in 19 states, are part of 30 in-place triple net leases among 18 operators. The 30 leases generate approximately $34 million of annualized revenue.

At September 30, 2009, the Company had $191 million of availability under its $200 million credit facility. The Company used funds available under its credit facility and proceeds from the new GECC term loan to fund the cash consideration paid at the initial closing. Anticipated Second Closing – At the second closing, the Company will acquire entities owning 40 additional facilities for approximately $270.4 million, consisting of: (i) $65.1 million in cash; (ii) assumption of $20.0 million of 9.0% subordinated debt maturing in December 2021; (iii) assumption of $55.7 million, 6.41% (weighted-average) HUD debt maturing between January 2036 and May 2040; and (iv) the anticipated assumption of $129.6 million, 4.85% HUD debt generally maturing in 2039. The second closing is expected to occur on April 1, 2010 subject to HUD approval and the other terms and conditions of the Purchase Agreement.

The 40 additional facilities, representing 4,882 available beds, located in 2 states are part of 13 in-place triple net leases among 2 operators. The 13 leases generate approximately $30 million of annualized revenue.

The purchase price and the form of consideration to be paid at the remaining closings are subject to a number of adjustments set forth in the applicable agreements. The Company expects the transaction to be immediately accretive to its adjusted Funds From Operations. $100 Million Term Loan On December 18, 2009, a wholly owned subsidiary of the Company entered into a secured Credit Agreement with GECC, as Administrative Agent and a Lender, providing for a new five-year $100 million term loan (the “Term Loan”) maturing December 31, 2014. The Term Loan will bear interest at LIBOR (the “Eurodollar Rate”) plus 5.5% per annum, but in no event will the Eurodollar Rate be less than 1.0% per annum. Until December 31, 2011, scheduled monthly payments on the Term Loan include interest only. Commencing January 1, 2012, monthly installment payments will include principal and interest based on a 30-year amortization schedule and an assumed annual interest rate of 6.5%, with a balloon payment of the remaining balance due at maturity. The Term Loan is secured by 18 long term care facilities under a master lease with one of the Company’s existing operators.

from Real Estate Weekly News


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