The Dealmakers Forum E-Newsletter, August 14, 2013 - Brookdale Posts Better Than Expected Performance, Banks Comeback in the Lending Market, Acquisition Market and Values of Assisted Living Communities

 

Bringing You Senior Care M&A Deals and News
 

August 14, 2013 Issue:

 

Seniors Housing Weekly Update: 60 Seconds with Steve Monroe
Brookdale Posts Better Than Expected Performance. By most measures, Brookdale Senior Living turned in a good second quarter, but not good enough to keep its share price up. Read More

 

Recent Senior Care M&A Deals

Long-Term Care

Acquirer

Target

Price

MEDICA

Senior Living Group

N/A

Edgewood Real Estate Investment Trust

4 senior living communities

N/A

American Realty Capital Healthcare Trust

3 assisted living communities   

$27.5 million

Senior Housing Properties Trust

Gracemont Assisted Living & Memory Care

$22.03 million

Nye Senior Services

The Meadows

N/A

Fortress Investment Group

15 senior housing projects

$200 million

Centers for Specialty Care Croup

Ontario County Health Facility   

$2 million

Laurel Health Care Co.

3 skilled nursing facilities   

$13.65 million

 

Financing of the Week

Who says banks have not made a comeback in the lending market? Bank of the West led a consortium of banks in a $124 million financing for Denver, Colorado-based Spectrum Retirement Communities. The other banks included Compass Bank, Colorado Business Bank and Raymond James Bank, N.A. The funds will be used to refinance existing debt and to buy out an equity partner on a portfolio of six senior housing properties in Kansas, Missouri, Illinois and Arizona. Spectrum manages more than 3,400 senior living units and two months ago sold a small portfolio in the Pacific Northwest..... Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

Deal of the Week

We don’t see health care REITs doing too much mortgage financing these days, but sometimes you have to look beneath the covers to get all the details. LTC Properties has entered into an agreement to provide $141 million of mortgage financing to Prestige Healthcare to help Prestige buy 15 properties with 2,092 licensed skilled nursing beds and 24 independent living units in Michigan. Trailing 12-month occupancy is about 84%, so there is some real upside on census, and the EBITDAR margin is around 10%. Of the total loan, approximately $126 million will be funded in the fourth quarter when the acquisition by Prestige closes, with additional forward commitments of $12 million for capital improvements and up to $3 million for short-term working capital. Over the next 12 years, depending on a variety of metrics, there could be additional loan proceeds up to $40 million, limited to $10 million per year. In addition, Prestige will have a one-time option to prepay up to 50% of the loan without penalty, and under certain circumstances, LTC Properties will have an option to purchase the portfolio for $178 million. The 30-year loan (yes, 30 years) is interest only for the first three years, with a rate of 9.41% for the first five years. While that may seem high, our bet is that the loan will be funding the entire purchase price, much like a sale/leaseback financing. This structure seems to have it all in terms of flexibility and relationship. While the properties are in the greater Detroit metro market, none are in Detroit itself......Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

CMBS Market for Assisted Living Concepts

With the purchase of Assisted Living Concepts by TPG completed last month, the private equity firm is wasting no time. Later this month, they hope to close on a $250 million CMBS financing secured by 79 ALC properties with 3,702 units in 10 states. This 79-facility portfolio has an occupancy rate of 78.1% (compared with 49.4% for the remaining 130 properties, and net cash flow of $47.8 million, which equals a 39.0% operating margin after a 5% management fee and a $525 per unit replacement reserve. Even though this 79-facility group has a better occupancy than the rest of the company, we still find it hard to believe that it has an operating margin higher than any other assisted living company, but with an occupancy rate that is 10 percentage points lower than the industry average. These numbers were based on the trailing 12-month results ended March 31, 2013, which should have included the beefed up staffing and training. An average of four new employees per building should have put a dent in the margins. The loan is expected to be priced at LIBOR plus 350 basis points for the first two years, increased by 25 basis points if the borrower extends the loan for a third year. There are two additional one-year extensions......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

One way to look at the acquisition market and values of assisted living communities is to look at the average net operating income (or EBITDA) per unit of the properties sold. In 2011 and 2012, for assisted living properties sold the average NOI was $12,700 per unit and $12,100 per unit, respectively. When these numbers go up, values obviously rise. What is interesting is that while these are the averages in the previous two years for AL properties sold, the average NOI per unit of the 79-property portfolio referenced above in the proposed CMBS financing by Assisted Living Concepts comes to $12,900 per unit. We would venture to say that the ALC portfolio is below average because of location, property size and occupancy. Hmmm....Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

 

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JUST PUBLISHED - The Senior Care Acquisition Report, 18th Edition
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!

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