Diversified Healthcare Trust announced that it closed a $140 million mortgage financing secured by 14 senior living communities located in nine states and consisting of 1,375 units that are managed by Five Star Senior Living, an operating division of AlerisLife.
This non-recourse and three-year loan has an initial maturity date of March 31, 2028, and two one-year extension options, subject to certain conditions. DHC plans to use the loan proceeds to redeem a portion of its outstanding 9.750% senior notes due 2025.
The loan has a variable interest rate based on the Secured Overnight Financing Rate (SOFR) plus a margin of 2.50% per annum. It has 24 months of interest-only payments and two six-month extension options of the interest-only period, subject to certain conditions.
DHC purchased a one-year interest rate cap with a SOFR strike rate equal to 4.50% in connection with the financing. The loan-to-value ratio on the financing is approximately 62%, and the implied capitalization rate of the collateral communities based on the appraised value is 7.0%, or $163,500 per unit. The loan also enables a portion of the principal to be prepaid with a prepayment penalty of 2% in year one, 1% in year two, and no penalty thereafter.
As previously disclosed, DHC has executed three additional term sheets with various lenders for total loan proceeds of approximately $200 million, which loans are expected to close in the next 45 days.
KEY QUOTES:
“This loan reflects continued progress on our strategy to reduce DHC’s financing costs and highlights the value of our SHOP assets with an appraised value of $163,500 per unit. With $145 million of cash on hand and $200 million of additional secured financings expected to close in the coming weeks, we remain confident in our plans to address DHC’s upcoming debt maturities while positioning the company for growth and delivering meaningful value for shareholders.”
- Matt Brown, Chief Financial Officer and Treasurer of DHC
