The Dealmakers Forum E-Newsletter, October 16, 2013 - A Frothy Seniors Housing Market, Cassidy Turley Recently Closed on the Last Two Communities in the Southeast, Level of Cash Flow in Valuation

 

Bringing You Senior Care M&A Deals and News
 

October 16, 2013 Issue:

 

Seniors Housing Weekly Update: 60 Seconds with Steve Monroe
A Frothy Seniors Housing Market? With a record number of attendees at the recent NIC Conference, the atmosphere was very similar to 2007 when the market last peaked. Read More

 

Recent Health Care M&A Deals

Home Health Care

 

 

Acquirer

Target

Price

Healthcare Homes

South Norfolk Carers Ltd.

N/A

Jordan Health Services

Healthcare Innovations Private Services

N/A

 

 

 

Long-Term Care

 

 

Acquirer

Target

Price

Kayne Anderson Real Estate Advisors

6 senior living communities

$400 million

Plum Healthcare Group

Sutter Oaks Midtown Nursing Center

N/A

American Realty Capital

Eight ALFs and Land

$143 million

Cornerstone Core Properties REIT, Inc.

Three Assisted Living Facilities

$15.3 million

 

Deal of the Week

Cassidy Turley recently closed on the last two properties of an eight-community portfolio of assisted living and memory care communities in the Southeast. The buyer was American Realty Capital Healthcare Trust (ARC), and they paid $143 million, or $223,400 per unit. Included in the sale was one development site in Georgia. These properties have an average age of 15 years and overall occupancy was 93%. There are 453 assisted living units and 187 memory care units. ARC will retain the existing manager, Atlanta-based The Arbor Company. While financial data has not been disclosed, we believe the in-place cap rate to be around 6% with some buyers believing that costs could be reduced, sending the cap rate up a bit... 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

About 18 months ago, Cambridge Investment and Finance Co., a subsidiary of Cambridge Realty Capital, purchased four underperforming senior living properties with 298 units in Texas from Emeritus Corporation. Since then, the properties have been managed by Dallas-based 12 Oaks Senior Living, and occupancy has increased by 24% to 92%. A new certified memory care center has been added at one of the communities, and part of the proceeds of the current refinancing will be used to add 75 licensed beds across the portfolio. GE Capital, Healthcare Financial Services provided $28 million in financing to repay the borrower’s first mortgage and mezzanine debt, as well as the future expansion and other improvements. The LIBOR-based floater has a five-year term. The Cambridge-owned properties operate under the name SunRidge Senior Living, and Cambridge currently owns 16 communities...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

The absolute level of cash flow is what matters in valuation, but the operating margin can be used as a decent predictor of value for skilled nursing facilities. In 2012, on average those nursing facilities with an operating margin (EBITDAR margin) of 10% or lower sold for an average price of $43,500 per bed. Those facilities with an operating margin above 10% sold, on average, for more than $62,000 per bed. In the scheme of the SNF acquisition market, that is a huge difference, and something that sellers should take note of. But don’t forget, a 10% operating margin in New Jersey or New York can produce a lot more cash flow than a 15% margin in a lower-rate state like Louisiana...Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

Stock of the Week

Emeritus Corporation hit a 52-week low in early September when it pre-announced lower third quarter earnings guidance. It turned out tours and deposits were lower than forecasted, with some blame possibly attributed to the Frontline “documentary,” although it appeared to be too soon for that to have had a significant impact. A month later, the stock is just $1.00 above that September low, and despite news from NIC that industry-wide occupancy was up in the third quarter, some investors are not buying a turnaround just yet for Emeritus. Other investors, however, believe it is grossly undervalued at current levels relative to its peer group, but the proof will be in the third quarter pudding when investors will be able to have a better understanding of what the real problem is and whether or not it got worse since early September. There are still other investors who think that at its current valuation, Emeritus is ripe for a takeover, since it is the only one that hasn’t seen any price appreciation since they all tanked mid-year. But any buyer would have to take a hard look at the HCP leases for the former Blackstone/Sunwest portfolio. Those escalators could hurt...Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

Grandbridge Real Estate Capital's Seniors Housing and Healthcare Finance Capabilities   

Grandbridge Real Estate Capital's dedicated Seniors Housing team offers seniors housing owners construction, nonrecourse acquisition/bridge and permanent financing options nationwide. 

The team has more than 50 years of combined seniors housing experience, and has closed more than $5 billion in seniors housing loan, sales and advisory transactions over the past 10 years. 

A subsidiary of Branch Banking and Trust Company (NYSE: BBT), Charlotte, N.C.-based Grandbridge has a proprietary lending platform, BB&T Real Estate Funding, as well as core balance sheet capabilities, which complement the firm's broad investor base that include Fannie Mae, Freddie Mac, FHA, insurance companies, CMBS investors, pension funds advisors, commercial banks and capital market investors.
For more information visit www.grandbridge.com/seniors_housing.

 

7th Annual HCap Healthcare Services & Capital Conference, December 4-6, 2013, JW Marriott, Washington, D.C. (Special Offer for HCDN readers – save additional $200 off Early-Bird rate!)
Strategy, Policy, Capital and M&A for the Healthcare Continuum - Healthcare’s best and brightest from LTC & Senior Living; Home Care and Hospice; Hospitals and Health Systems; and Physician and Medical Groups will gather in Washington, D.C. to share experiences, look ahead to 2014’s changes, and to meet with Capital. 
 

Register today to:
Participate in interactive discussions with healthcare’s cutting-edge innovators, top policy makers and Wall Street analysts.
 

Meet leading lenders, iBanks, PE firms, M&A firms and other financial advisors to discuss capital for growth or acquisition purposes.
 

Discuss potential acquisitions and divestitures with other providers.
 

Engage C-Level thought leaders to share perspectives and business models and explore potential partnerships.
 

For more information and to register:  www.hcapconference.com (Use the code HCAPDN to save $200).

 

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