The SeniorCare Investor: A Gem At A Record Price

A Florida CCRC Sets A New High Mark

Throughout the years there have been very good properties that have sold, some extremely good ones and the exceptional few, but rarely in the CCRC market. For the past decade, most CCRCs that come to market are being sold because of problems, which can range from old age, lack of fill-up, outdated configuration, new competition and in some cases, all of the above. The sales price usually ranges between $10 million and $90 million, but most of them are under $50 million, and most end up being under $100,000 per unit/bed because they are just not that profitable and often need significant capital improvements.

But once in a while, a truly unique property comes on the market that results, we believe in this case, in a record price. A special purpose LLC, controlled by Craig Anderson, last month purchased The Devonshire at PGA National, a 423-unit/bed CCRC in Palm Beach Gardens, Florida. The community was built in 1999 and has 327 independent living units, 17 assisted living units, 19 Alzheimer’s units and a 60-bed skilled nursing center. It is an entrance fee CCRC, with entrance fees ranging from $222,000 to $687,000. We believe occupancy is close to 97%. SHP Senior Living Services, also controlled by Craig Anderson, will be managing the CCRC, which will be the operator’s fourth community in Florida under management.

The purchase price and financial details have not been disclosed, but we do know that Merrill Lynch Capital Healthcare Finance provided a total of $181.2 million in financing for the acquisition, which consisted of a $155.2 million senior term loan, a $6.4 million senior revolver and a $19.6 million mezzanine term loan. We do not know how much equity was put into the deal, but we assume it may have been up to $15 million. In addition to financing the acquisition cost, the Merrill financing also funded part of the closing costs plus the statutory minimum liquid reserve requirements. Consequently, our best guess is that the purchase price was somewhere between $160 million and $175 million, or between $380,000 per unit and $410,000 per unit. While the estimated per-unit price is not a record for a seniors housing property, we believe that the aggregate price is the highest ever paid for a single asset in the seniors housing market; the next highest one we could find was at least 30% lower than the low end of our estimated range. If someone knows of a higher-priced asset, we would like to hear about it and we will publish it next month.