About Purchase / Leaseback
Capital Funding Group offers purchase/leaseback solutions through Capital Senior Ventures, LLC (CSV). When skilled nursing and assisted living facility operators have distressed or underperforming assets that they need to turn around, a purchase/leaseback strategy may be the best option. We can identify undervalued assets, leverage our extensive network of banks and lenders, and provide experienced managers and oversight to execute on the plan.
Creative Real Estate Financing for Senior Housing
How It Works
When an operator partners with CSV to acquire a facility, we work with them to complete the project using little or no equity from the operator. Post-acquisition, CSV own the real estate and the client owns the operator that leases the facility. The client can then buy the facility back from CSV within two to five years.
Typical Lease Terms: At the time of purchase, the operating and property companies will be separated, with the client owning the OpCo and CSV owning the PropCo. The lease is the most significant document between CSV and the client. It is a triple net lease with market escalators. The lease rate is based upon risk and collateral and then applied to total deal costs.
Buy Back Sale Agreements: At the time of purchase, CSV and the operator enter a sale agreement. The operational risks of the project will impact the pricing of the sale agreement, but the goal is to have the operator purchase the facility in years three through five. The majority of operators are able to improve cash flow and increase the facility’s value. Through a successful turnaround, the operator may build enough equity to allow them to repurchase the facility with no cash requirement and a loan-to-value (LTV) around 75%.
- 100% financing
- Less expensive than a traditional REIT structure
- Lower cost of capital versus traditional private equity
- Participation in operating upside
- Short lease terms