Crown Care offers purchase/leaseback solutions through Crown Financial Services, (CFS). 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.
Companies will typically use leasebacks when they need to utilize the cash they invested in an asset for other purposes but they still need the asset itself to operate their business.
Sale-leasebacks can be an attractive alternative method of raising capital. When a company needs to raise cash, it typically takes out a loan (incurring debt) or affects equity financing (issuing stock).
A loan must be repaid and shows up on the company's balance sheet as a debt.
A leaseback transaction can actually help improve a company's balance sheet health: The liability on the balance sheet will go down (by avoiding more debt), and current assets will show an increase (in the form of cash and the lease agreement).
Although equity does not need to be paid back, shareholders have a claim on a company's earnings based on their portion of its stock.
CREATIVE Real Estate Financing
for Senior Housing
How it works
TYPICAL LEASE TERMS
At the time of purchase, the operating and property companies will be separated, with the client owning the OpCo and CFS owning the PropCo. The lease is the most significant document between CFS 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 AGREEMENT
At the time of purchase, CFS 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%.