The Dealmakers Forum E-Newsletter, September 18, 2013 - Health Care REITs Making A Comeback, Omega Healthcare Investors Reached an Agreement to Purchase Nursing Facilities From Ark Holding Company, Individual Skilled Nursing Facility Cap Rates

 

Bringing You Senior Care M&A Deals and News
 

September 18, 2013 Issue:

 

Seniors Housing Weekly Update: 60 Seconds with Steve Monroe
Health Care REITs Making A Comeback. Health Care REIT stocks hit bottom in the past two to four weeks, and are making a comeback, with Omega Healthcare Investors announcing a large SNF deal. Read More

 

Recent Health Care M&A Deals

Long-Term Care

Acquirer

Target

Price

LTC Properties, Inc.

 120 bed skilled nursing facility

$14.4 million

Hidden Hills Health and Rehab

Altitude Health Services

$2.25 million

Omega Healthcare Investors 56 SNFs-Covenant Dove Portfolio $525 million

 

Deal of the Week

In the largest skilled nursing facility acquisition of the year, actually in about two years, Omega Healthcare Investors announced it reached an agreement to purchase 56 nursing facilities from Ark Holding Company. This portfolio was known in the market as the Covenant Dove portfolio. Covenant Dove is based in Memphis, Tennessee, and Behrman Capital was the controlling shareholder. The purchase price comes to $525 million, or $95,500 per bed. We believe the cap rate was close to 11%. Omega will lease the facilities back to Ark Holding for a 50-year term, with rental payments yielding 10.7% per annum over the term of the lease. The tenant will have the right to prepay the remainder of its obligations under the lease starting after 40 years, equal to the sum of the unamortized portion of the original $525 million investment. The facilities are located in a dozen states, with more than two-thirds located in South Carolina (17), Mississippi (13) and Texas (9). Behrman Capital originally purchased Covenant Dove for about $250 million, but the basis is higher after a few acquisitions. Covenant Dove also has a small hospice business which we believe was included in the sale. Jefferies & Company represented Ark Holding and Behrman Capital in the sale, which is expected to close by the end of the year..... Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

Financing of the Week

As most borrowers know, the HUD 232 program is basically meant for skilled nursing and assisted living. But Love Funding just closed on a $25.9 million refinancing and substantial rehab of a six-story independent living community in Warren, Michigan. The reason why the new loan qualifies is that part of the proceeds will be used to convert three of the floors to assisted living and skilled nursing. When the work is finished, there will be 66 independent living units, 104 assisted living units and 92 skilled nursing beds. This is a former Holiday Inn that was converted to independent living and will now go through a second conversion to meet the needs of the community. The renovated community will operate like a CCRC but with no entrance fees.....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

Individual skilled nursing facility cap rates can be all over the map, with ranges between 9% and 17%. But the national average for most of the past 15 years has been between 12.5% and 13.5%. While regional cap rates can be overly influenced by high-priced or low-priced sales in any given year, in 2012 four of the five regions had an average cap rate that fell within the national range of the past 15 years. The only outlier in 2012 was the Southeast region, which for reasons unknown had an average cap rate of 11.8%, down from 12.6% in 2011. The Northeast region had the reverse situation, with the 2012 average cap rate at 12.9%, which was up from 11.3% in 2011. Over time, these regional cap rates tend to even out with the national averages......Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

Long-Term Care Commission

While we are certainly not surprised, we are disappointed that the Long-Term Care Commission has basically finished its work but will have little to no impact on the future of long-term care services and financing. There were the expected modest proposals for greater focus on quality, better training for direct care workers, and better integration of supports and services with medical care. But when it came to how this country is going to finance the long-term care needs of the aging population, the Commission fell short, partly because five of the 15 members called for a new public social insurance program. By “public” we assume they mean a government funded or sponsored program. Given the budget deficits, while lower than a year ago, one has to wonder what rock they just crawled out of to keep pushing a government program like the former CLASS Act proposal, which itself was a budget gimmick to get funding for the Affordable Care Act. Ironically, its death late last year gave birth to the creation of this Commission. The bottom line? Too little time for too big a problem, so failure was predetermined......Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

Oak Grove Capital

Oak Grove is a nimble, non-institutional mortgage lender with an experienced, dedicated Seniors Housing group focused on high-quality service and delivery. We don’t aim to be the biggest, but we work hard to be the best, using a highly personalized approach that simply outperforms other lenders. We have decades of experience working closely with Fannie Mae, Freddie Mac and HUD. Our clients have learned they can depend on it. That’s why 80% of our business is repeat business. See it for yourself.  Call us at 630-399-0140 or visit us online at http://www.oakgrovecap.com/loan-products/senior-housing/.

 

GE Capital, Healthcare Financial Services provides tailored healthcare real estate financing solutions

Like a bank: We finance healthcare real estate. Unlike a bank: Healthcare financing is all we do

We offer customized healthcare real estate and medical property financing solutions including first mortgages, interim financing, acquisition financing and sale leasebacks for a wide range of healthcare operators, real estate developers and investors.  In fact, during 2012 we helped organizations like yours finance over $2.6B in senior housing, skilled nursing facilities and medical properties across the U.S.
Stop just banking. And start building.
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