On May 27, 2016, Forest Park Realty Partners III, LP and BT Forest Park Realty Partners, LP (collectively, the “Borrowers”) and HCA executed a purchase and sale agreement (“PSA”) whereby, subject to bankruptcy court approval and customary closing conditions, HCA will purchase the hospital real estate that serves as collateral for our Dallas mortgage loan for $135.0 million. The PSA provides for an outside date to close the sale of June 30, 2016.
As of May 30, 2016, the outstanding principal balance on the Dallas mortgage loan was $110.0 million, with $14.6 million of accrued and unpaid interest and fees. Sabra expects to fully realize all outstanding amounts upon closing of the sale, which would result in a 10.4% annualized rate of return on our investment. The $14.6 million of outstanding accrued and unpaid interest and fees consists of $2.3 million of interest previously recognized and $12.3 million of unrecognized interest and fees (unrecognized revenue of $0.19 per diluted common share). Sabra expects to use the proceeds to make additional payments on its revolving credit facility and to finance future investments.
Commenting on the developments, Rick Matros, CEO and Chairman, said, “We are pleased that the full value of our Dallas investment, including all interest earned, has been realized. Upon completion of the proposed sale and repayment of outstanding principal and interest on this investment, we will have received total cash of approximately $323.5 million over the life of our investments in the three Forest Park hospitals, which is $18.5 million greater than our total cash outlays for these investments. Our pro forma leverage, after giving effect to the acquisition of the previously announced NMS facility and to the proceeds we have realized or expect to realize from the three Forest Park hospitals, will drop to 5.17x. Although we did not realize the long term benefit we had hoped for with the Frisco hospital, our overall investment thesis has resulted in a positive outcome for what was a complex situation.”
Sabra also announced that on May 25, 2016, the borrowers under our Forest Park Medical Center – Fort Worth construction loan closed the previously announced sale of the Fort Worth hospital and medical office real estate. In connection with the closing of that sale, we received $70.7 million, which included all outstanding principal, interest and late fees under the loan. The proceeds will be used to make additional payments under our revolving credit facility.
This release contains “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995. These statements may be identified, without limitation, by the use of “expects,” “believes,” “intends,” “should” or comparable terms or the negative thereof. Forward-looking statements in this release include all statements regarding our expectations concerning our Dallas mortgage loan, including our expectations regarding the timing of closing of the sale of the Dallas real estate, the amount of and our use of net proceeds from such sale and our expected return.
Our actual results may differ materially from those projected or contemplated by our forward-looking statements as a result of various factors, including the possibility that the closing conditions to the purchase and sale agreement may not be satisfied, including that the bankruptcy court may not approve the purchase and sale agreement; any delay in closing the sale or the possibility of non-consummation of the sale; or the possibility of the consummation of the sale on terms that are less favorable than those currently contemplated. In addition, other potential risks and uncertainties include, among others, the following: our dependence on Genesis Healthcare, Inc. and certain wholly owned subsidiaries of Holiday AL Holdings LP until we are able to further diversify our portfolio; our dependence on the operating success of our tenants; the significant amount of and our ability to service our indebtedness; covenants in our debt agreements that may restrict our ability to pay dividends, make investments, incur additional indebtedness and refinance indebtedness on favorable terms; increases in market interest rates; changes in foreign currency exchange rates; our ability to raise capital through equity and debt financings; the impact of required regulatory approvals of transfers of healthcare properties; the effect of increasing healthcare regulation and enforcement on our tenants and the dependence of our tenants on reimbursement from governmental and other third-party payors; the relatively illiquid nature of real estate investments; competitive conditions in our industry; the loss of key management personnel or other employees; the impact of litigation and rising insurance costs on the business of our tenants; the effect of our tenants declaring bankruptcy or becoming insolvent; uninsured or underinsured losses affecting our properties and the possibility of environmental compliance costs and liabilities; the ownership limits and anti-takeover defenses in our governing documents and Maryland law, which may restrict change of control or business combination opportunities; the impact of a failure or security breach of information technology in our operations; our ability to find replacement tenants and the impact of unforeseen costs in acquiring new properties; our ability to maintain our status as a REIT; compliance with REIT requirements and certain tax and tax regulatory matters related to our status as a REIT; and other factors discussed from time to time in our news releases, public statements and/or filings with the Securities and Exchange Commission (the “SEC”), especially the “Risk Factors” sections of our Annual and Quarterly Reports on Forms 10-K and 10-Q. We do not intend, and we undertake no obligation, to update any forward-looking information to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events, unless required by law to do so.