Colony Capital Completes $1.5B Refi With Assist From Ventas

June 17, 2019

The refinancing of $1.7 billion in consolidated debt in Colony’s health-care segment includes a $490 junior tranche provided by Ventas. The loan’s collateral comprises 158 health-care properties.

Thomas Barrack, Chairman Colony Capital LLC. Credit: Jin Lee/Bloomberg

Colony Capital Inc. and its subsidiaries have refinanced a prior $1.7 billion consolidated health-care loan maturing in December 2019 with a new interest-only loan totaling $1.5 billion, Colony announced Thursday.

The collateral package for the new loan includes 158 U.S. health-care properties, consisting of medical office buildings, senior housing properties, skilled nursing facilities and hospitals. Colony’s ownership position in these properties is 70 percent.

The new loan has a five-year term (inclusive of three one-year extension options) and a blended interest rate of one-month LIBOR plus 3.33 percent. Health-care REIT Ventas Inc. took the entire junior tranche of $490 million.

Colony Capital, headed by Executive Chairman & CEO Thomas J. Barrack Jr., declined to comment on the deal beyond their prepared statement, but Commercial Property Executive learned separately that Citi was the lead on the senior tranche, with Barclays and Deutsche Bank are participants.

This refinancing, along with other transactions completed earlier this year, addresses four of Colony’s six health-care loans, or 87 percent of total outstanding principal balances, with maturities in 2019. In its own announcement on the deal, Ventas noted that its tranche of the new loan bears interest at LIBOR plus 6.42 percent, representing a current all-in GAAP rate of 9 percent and that the new loan has a 75 percent loan to value.

Ventas, which is led by Chairman & CEO Debra Cafaro, had previously held $270 million of the refinanced loan, which bore interest at 8.25 percent. In addition to the new loan, Colony Capital used newly contributed equity capital and asset sale proceeds to repay the refinanced loan in full, according to Ventas.

Health-care sector robust

Health-care private equity and health-care REITs will both be active drivers of major acquisitions this year, according to the 2019 Health Care Outlook from Newmark Knight Frank. Meanwhile, it’s unclear whether ongoing mergers will result in more development opportunities or in redundant space and consolidation.

The medical office building market continues to enjoy small-but-steady decreases in the nationwide average vacancy, which is now down to about 7.7 percent. Absorption of MOB space in 2018 was 11 million square feet.