The Dealmakers Forum E-Newsletter, June 19, 2013 - Development Definitely on the Upswing Since the Market Bottomed Out, Interest Rates Rising, Things Just Haven’t Been Going Well for AdCare Health Systems This Year

 

Bringing You Senior Care M&A Deals and News
 

June 19, 2013 Issue:

 

Seniors Housing Weekly Update: 60 Seconds with Steve Monroe
This is Not a Yolk. Regulations have gone too far, and in this case, they were a waste of time and money.. Read More

 

Recent Senior Care M&A Deals

Long-Term Care

Acquirer

Target

Price

NorthStar Realty Finance

Landing at the Shoreline

$10.5 million

Midwest Health Management

Emeritus at Augusta

$2.2 million

Regional Owner/Operator

Two Skilled Nursing Facilities

$8 million

NorthStar Realty Finance

11 Assisted Living Communities

$51 million

Regional Company

Texas Skilled Nursing Facility

$4.45 million

National Owner/Operator

Courtyard Assisted Living

$7.1 million

 

Financing of the Week

Even though debt financing may have loosened up since the end of the Great Recession, it is not easy to get all the funds you need for new construction unless you have deep pockets. And with development definitely on the upswing since the market bottomed out, getting the capital you need in one place can certainly make the capital-raising task easier. Such was the case when Contemporary Healthcare Capital, LLC (CHC) provided $5.25 million in construction financing for a new 48-bed dementia care facility in Oregon. That comes to $109,000 per bed, and while the owner most likely had some skin in the game, CHC also provided $2.25 million in mezzanine financing, which includes funding lease-up reserves. The combination had to provide the owner with much-needed flexibility... Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

Stat of the Week

Interest rates are rising, having increased by more than 50 basis points in the past several weeks. But what will that do to cap rates for seniors housing? The spread between the average seniors housing cap rate (IL and AL combined) and the 10-year Treasury note widened to 680 basis points in 2012 after staying constant at 620 basis points in both 2011 and 2012. Using last year’s spread would result in a projected cap rate of about 8.9% for 2013, which we all know is not going to happen, barring some major negative event in the next six months. Buyers are as aggressive and sometimes more so than in 2012, especially for quality properties, so that spread over the 10-year Treasury should drop below 600 basis points. That is still far from the record low spread of 370 basis points in 2007, which we may never see again....Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

Non-Deal of the Week

Things just haven’t been going well for AdCare Health Systems this year. First, there was the accounting issues and the pending restatements of last year’s quarterly results. Then the CFO left. Then the Vice Chairman announced a tender offer for control of the company, only to delay the offer because of more research needed on Ohio corporate acquisition law. Shareholders are still waiting. Now, a $28 million acquisition of two skilled nursing facilities in Tennessee ($66,600 per bed), signed last February, has been terminated by the seller, Avalon Health Care. AdCare has been one of the most prolific buyers of skilled nursing facilities in the past two years, but seems to have hit a wall in getting deals done. Will the big one for control of the company ever get done? We are not holding our breath on that one....Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

Best News of the Week

After fits and starts, mostly caused by some legal issues in California which are largely behind it, Skilled Healthcare Group received its first commitments from HUD to refinance nine of its skilled nursing facilities in an aggregate amount of $79.8 million. They are supposed to fund within the next five weeks and will have an all-in fixed-rate cost of approximately 4.6%, which includes the mortgage insurance premium, over the next 30 to 35 years. The company is now in a position to seek additional HUD financing up to $250 million. The approximately 300 basis point saving in rate will result in nearly $2.4 million of extra cash flow in just this first tranche. This is a big win for the company as they complete additional HUD funding at similar rates....Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

TOMORROW: Interactive M&A Webcast:
Physician Medical Groups: Buying, Selling and Valuing
Thursday, June 20, 2013, 1:00 pm ET            
What drives this market? Where and when should you buy or sell? Who’s buying what and what influences the valuation of physician medical groups? Find out more from our expert panel: Aytan Dahukey (Moderator), Counsel in the Corporate Practice Group, Sheppard Mullin Richter & Hampton; Bill Gil, PCEO, Medical Foundations, Providence Health & Services- Southern California; Kenneth Hawkins, Senior VP, Acquisitions & Development, Community Health Systems; Jason Ruchaber, Partner, HealthCare Appraisers, Inc.;  Jonathan Morphett, Managing Director, Avondale Partners LLC.
Go to http://www.levinassociates.com/conferences/1306b-online-conference or call 800-248-1668 to register.

 

JUST PUBLISHED - The Senior Care Acquisition Report, 18th Edition - Save $50 Instantly
Deals have been made. The 2013 Senior Care Acquisition Report contains private deals in this market that are frequently too small to make it into the financial press. Go to http://www.levinassociates.com/landing/scar18order or call 800-248-1668 to order today!

Webcast Calendar... Click here to see more