JER closes on $69m healthcare acquisition

The McLean, Virginia-based firm has partnered with Formation Capital to buy six skilled nursing homes from healthcare provider Adventist.

JER Partners continues to eye opportunistic deals in the US healthcare-related real estate sector having just acquired six skilled nursing homes for $69 million.

The McLean, Virginia-based firm partnered with healthcare investment firm Formation Capital to buy the Maryland properties from healthcare provider Adventist HealthCare.

In July 2007, JER and Formation took private the nursing home operator Genesis Healthcare in a deal valued at $1.52 billion. As part of the latest transaction, Genesis will lease the nursing homes and assume management and operational responsibilities. The deal, in which JER will hold a majority interest, was done through JER’s $772 million Fund IV, which closed in 2008.

Frank Small, managing director in charge of the firm’s healthcare team, said in an interview the properties were acquired for an unlevered going-in cap rate of 11 percent and were financed with a $48 million mortgage from KeyBank, which also marked a new banking relationship for JER. The cash-on-cash equity yield, Small said, would be in excess of 20 percent.

Small said JER was concentrating primarily on healthcare-related real estate deals as well as distressed debt and workout situations.
“We are very excited about the opportunities we are seeing in the [healthcare] sector and what we have in the pipeline,” he added.

Last July, JER closed on the acquisition of a six-building portfolio of skilled nursing facilities in Florida and Pennsylvania, which will be leased back to the operator. Small said at the time that the deal, valued at $50 million and with a cap rate of nearly 12 percent, was part of a $300 million pipeline of potential healthcare-related transactions JER was conducting due diligence on.