The SeniorCare Investor: Atria Senior Living Lands Deal--
After Months Of Negotiating, Atria Gets Sterling Glen Assets
Sometimes it takes longer to close a deal than expected, but when the wait is worth it, you persevere. Atria Senior Living had its eyes on what is known as the Sterling Glen portfolio, owned by Cleveland, Ohio-based Forest City Enterprises (NYSE: FCE), for quite a while. Rumors swirled around the market last winter that the deal fell apart, was back on again and then off again, but apparently Atria never gave up. The assets involved were too strategic to walk away from, and while it may not have been a bargain, the acquisition solidifies Atria’s New York City metro area foothold as the dominant assisted living provider, especially on Long Island.
Part of the reason for taking so long was that the transaction was quite complicated, with a few of the properties co-owned by the seller and an outside investor, and with most of them located in New York. As anyone who has tried to close a deal in the Empire State knows, you are at the whim of the Department of Health and the licensing bureaucrats who know how to take their sweet time to approve the license transfer, even if you are a provider in good standing in the state. Forest City is actually selling 12 facilities to Atria, including six on Long Island, one in Forest Hills, Queens, two in Connecticut, and one each in Westchester County, New York, Philadelphia and Florida. In addition, Atria is purchasing a thirteenth facility in Westchester County from the developer who was a co-owner with Forest City on two of the Long Island properties. Before Forest City could close on its deal with Atria, it had to buy out the interests of Hassett Belfer Senior Housing in two of the Long Island properties with a total of 222 independent living units. Allen McMurtry of CLW Health Care Services Group represented Hassett Belfer in that sale, which, based on a 100% interest, was valued at $82.8 million, or $373,000 per unit.
From what we have been able to determine from market sources, the approximate purchase price for all 13 facilities is $680 million, or about $383,700 per unit. The value of the New York metro properties is most likely above $400,000 per unit, because the Florida and Philadelphia communities combined may be worth closer to $250,000 per unit using a 6.5% cap rate. Of the 1,772 total units, 486 are assisted living and Alzheimer’s and 1,286 are independent living, with a combined average monthly revenue per unit of about $5,000, which should be closer to $5,500 next year. But the average doesn’t really tell the whole story, as one 158-unit independent living community on Long Island, which just opened on July 3, has studios that start at about $4,500 per month and two-bedroom units going for $11,000 to $12,000 per month. It opened with 80 reservations in place, and about 40 residents moved in during July. With that demand we would not be surprised if it filled by the end of next summer.