SABRA Healthcare REIT (NYSE: SBRA) reported in its quarterly earnings that Forest Park Medical Center (FPMC) in Frisco is having trouble paying rent as of June, 2015. SBRA said that FPMC approached it in 2Q15 and that in May of this year they entered into a memo of understanding to restructure the terms of the lease subject to FPMC obtaining financing. As of July 21, financing had not been obtained and SBRA reports uncertainty with regard to the timing and adequacy of financing.
SBRA paid $119.8 million for FPMC, a physician owned hospital developed by the Neal Richards Group. The hospital specializes in surgical procedures and has 54 total beds; including 30 inpatient rooms, 14 family suites, 10 ICU beds and 12 operating rooms. The initial yield on the acquisition was 8.75% for SBRA resulting in GAAP rent of $13.3 million according to SBRA. While the yield is attractive, the price paid works out to $875/SF which is considerably higher than the current running YTD average of $444 per SF.
In addition, SBRA reported $1.9 million in deferred interest on its mortgage loan with Forest Park Medical Center in Dallas. They also reported that the $110M investment in the Dallas mortgage loan is less than the estimated fair value of the real estate collateral, based on a third party appraisal of the real estate. Under the original terms, SBRA had an option to purchase the facility for up to $168 million.
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