The SeniorCare Investor: Turnaround At Holiday Retirement -

After Hitting Bottom Three Years Ago, Prospects Improve
 

A little over three years ago, we started hearing that things had not gone as planned for Fortress Investment Group’s (NYSE: FIG) high-priced acquisition of Holiday Retirement Corporation, at the time the largest retirement housing company with more than 300 communities and 35,000 units. You will remember that funds affiliated with Fortress purchased Holiday in early 2007 for a then-record price of just over $6.6 billion, or $189,000 per unit, and a cap rate reportedly around 5.5% to 5.75%, which was a shocker at the time. But there were a few other bids within 10% of the winning bid, so FIG was not alone with its valuation. Well, at $6.6 billion they were, and it got a lot lonelier within a few years.

As part of the transaction, and why we believe Fortress “overpaid” for the assets, was the development pipeline of 12 to 15 communities a year which they had the right of first refusal to manage and acquire. In the past, these annual developments were expected to throw off more than $1.0 million of EBITDA each once stabilized, so FIG was looking at up to a $75 million increase in annual EBITDA after six years if things stayed on track. Unfortunately, as we all know, the train fell off the track as the Great Recession brought down the housing market, and many other things,......Want to read more? Click here for a free trial to The SeniorCare Investor and download the current issue today