Aviv acquires two ALFs and one post-acute and long-term care SNF for $82 million

Jul 11 2014

Aviv REIT, Inc. ("Aviv" or the "Company") (NYSE: AVIV) announced today it has acquired two assisted living facilities ("ALFs") and one post-acute and long-term care skilled nursing facility ("SNF") for $82.0 million (the "Acquisition"), and two parcels of land and the entitlements for the construction of two new ALFs and a 50 unit addition to one of the existing ALFs for $12.2 million (the "New Construction Projects"), all of which are located in Massachusetts, for a total of $94.2 million. The Acquisition includes a 126 unit ALF and a 72 unit SNF located in West Yarmouth, MA, which is in the center of Cape Cod, and a 93 unit ALF located in Weston, MA, an affluent suburb of Boston. The New Construction Projects, which are more specifically described below, include two ALFs in West Yarmouth and an ALF in Brewster, MA, also located on Cape Cod.

The properties will be triple-net leased to existing Aviv operator Maplewood Senior Living ("Maplewood"), an operator of twelve facilities in three states, all of which are triple-net leased from Aviv. The Acquisition has an initial cash yield of 8.0%, which increases to 8.5% in year two, with CPI-based annual escalators thereafter, and an initial lease term of 10 years. The New Construction Projects have an initial cash yield of 9.0% upon completion, with CPI-based annual escalators, and an initial lease term of 10 years.

All of the properties are located in affluent, high barrier to entry markets with strong demographics. The monthly revenues per occupied room are approximately $6,000 and the occupancy of the facilities is 91%. These metrics are consistent with Maplewood's other properties in Connecticut and Ohio that are also in affluent, high barrier to entry markets with strong demographics and high occupancy. More information about Maplewood can be found below.

The total expected cost for the New Construction Projects is $69.7 million, inclusive of the $12.2 million paid for the land parcels and entitlements, with construction expected to take place from the end of 2014 to the end of 2016. The New Construction Projects are already subject to a triple-net lease with Maplewood and consist of the following:

• A 50 unit addition to the ALF in West Yarmouth that was included in the Acquisition with a total estimated cost of $12.6 million and an initial cash yield of 9.0%. Construction is expected to begin in the second quarter of 2015 and is expected to be completed in the third quarter of 2016.
• A 75 unit ALF in West Yarmouth with a total estimated cost of $19.8 million and an initial cash yield of 9.0%. Construction is expected to begin in the second quarter of 2015 and is expected to be completed in the third quarter of 2016.
• A 131 unit ALF in Brewster with a total estimated cost of $37.3 million and an initial cash yield of 9.0%. Construction is expected to begin in the fourth quarter of 2014 and is expected to be completed in the second quarter of 2016.

"This deal demonstrates our ability to opportunistically acquire high-quality senior housing properties at attractive valuations, complementing our primary investment strategy of acquiring post-acute and long-term care skilled nursing facilities," said Craig M. Bernfield, Chairman and Chief Executive Officer of Aviv. "We further diversified our high-quality portfolio, adding best-in-class private pay healthcare properties in desirable northeast markets, and further enhanced our tenant diversification by materially growing our relationship with Maplewood."

Mr. Bernfield continued, "Our relationship with Maplewood is a key element of our growth strategy, as we have now successfully developed, acquired and renovated twelve assisted living facilities together. Maplewood has become a premier multi-state operator in high wealth demographic markets, providing high-quality service in hospitality-like real estate, with average monthly rates of approximately $7,000. Due to our national contacts and relationships, we are able to continue to source accretive off-market acquisitions of SNFs and ALFs, creating long-term cash flow and value for us, and a win-win dynamic for Aviv and our operators."