Sabra Health Care REIT (Nasdaq: SBRA), a national real estate investment trust, has entered into a proposed agreement to provide the Recovery Centers of America (RCA) with a $325 million mortgage loan, which would be secured by eight inpatient addiction treatment facilities.
Six of the centers are stabilized while two properties, which opened during the past 12 months, are projected to do so next year. All eight centers are located in the Northeast and Midwest, offering services including medically supervised detox and inpatient treatment, as well as partial hospitalization (PHP) and intensive outpatient programs (IOP).
Upon issuance, the loan would bear a yearly interest at 7.5%, have an initial five-year term and give Sabra a right of first offer to acquire the underlying facilities should RCA decide to sell any of the eight centers.
The loan would expand the business history between Sabra and King of Prussia, Pennsylvania-based RCA, which operates inpatient and outpatient facilities across Pennsylvania, Maryland, New Jersey, Massachusetts, Illinois and Indiana.
In the fourth quarter (Q4) of 2019, Sabra acquired and funded the redevelopment of a property in Monroeville, Pennsylvania previously owned by HealthSouth Corporation, which is now known as Encompass Health (NYSE: EHC). A long-term acute care inpatient facility had previously operated on the property — located in a suburb east of Pittsburgh — before it was purchased and redeveloped by Sabra, who subsequently leased it to RCA.
The current loan agreement for the eight RCA centers is expected to close later this year in Q4.
“We are pleased to work with the RCA team in the first step to recapitalize RCA as it looks forward to continued growth in existing and new markets,” Talya Nevo-Hacohen, Sabra’s chief investment officer, said in a press release. “Sabra’s investment in Recovery Centers of America at Monroeville was an early investment that has allowed us to witness RCA’s team and approach firsthand. Based on that experience, we see the mortgage loan as a strategic investment in RCA and underscores Sabra’s commitment to the behavioral health sector.”
Sabra’s stock was little changed at $16.35 per share at the end of trading Monday.