The Dealmakers Forum E-Newsletter, October 23, 2013 - Shutdowns, ObamaCare and Senior Care, LCB Senior Living Recently Closed on the Acquisition of an Alzheimer’s Facility Located in Rhode Island, Cap Rates

 

Bringing You Senior Care M&A Deals and News
 

October 23, 2013 Issue:

 

Seniors Housing Weekly Update: 60 Seconds with Steve Monroe
Shutdowns, ObamaCare and Senior Care. The government shutdown and the chaotic opening of the health insurance exchanges provide a glimpse at the future and the challenges that the ACA will present. Read More

 

Recent Health Care M&A Deals

Long-Term Care

 

 

Acquirer

Target

Price

Personal Healthcare, LLC 

St. Joseph Nursing Home

N/A

Texas Owner/Operator

Parkwood Place Healthcare Center

$2,000,000

LCB Senior Living 

60-unit Alzheimer's Facility 

$12,300,000

 

Deal of the Week

Massachusetts-based LCB Senior Living recently closed on the acquisition of a 60-unit Alzheimer’s facility located in Rhode Island. The facility opened in 2009, so we are not sure whether the low occupancy of just under 60% was a result of the timing of the opening or that there was an out-of-state third party manager operating the facility. Quite possibly both were a factor. But LCB has plans to stabilize it, and our guess is that they will be in a hurry. The purchase price was just over $200,000 per unit, reflecting the new construction and not the current financial performance. Wells Fargo Bank provided $8.6 million in bridge financing which is for three years with two one-year extension options, with interest only for the first three years. The structure makes sense to give LCB plenty of time to stabilize the property and produce a few solid years of cash flow before refinancing it. LCB’s joint venture partner, Prudential Real Estate Investors, invested close to $3.7 million of equity in the deal. The total of $12.3 million of financing was arranged by Cushman & Wakefield’s Senior Housing Capital Markets Group... 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

Not many developers/operators will sink a lot of their own funds in a new development, especially a rental CCRC in Michigan, without having any construction or permanent financing lined up. But that was the situation for an affiliate of Riverview Health in Gross Pointe Woods, Michigan, for a 243-unit/bed community that broke ground in the beginning of 2013. HJ Sims stepped in to close the funding gap after the owner had already invested about $9.25 million of his own equity in the project. The for-profit owner was able to raise part of the funds with a $17.32 million, 30-year tax-exempt bond issue because 20% of the 77 IL units were set aside for people meeting the income test of 50% of the median area income. An additional $10.0 million in 15-year taxable bonds were sold by Sims for the portion of the project that was not eligible for tax-exempt financing. About 35% of the total debt was sold to Sims’ retail investors, with the rest to institutional buyers and bond funds. When finished, the 9-acre community will have the 77 IL units, 80 assisted living units and an 86-bed skilled nursing center. It is expected to open in the first quarter of 2013. Later on there are plans to develop 40 IL cottages on the site that will be sold as condos....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

The Ensign Group continues to confound the market, well, at least those investors who have not invested in the company. Here’s a company that recently settled with the Department of Justice and, without admitting to any wrongdoing, has paid a lump sum of $48 million to the Feds. Since the end of August, the stock has hit a new 52-week high practically every week, is up 11% since September 1 and it is up 47% in the past 12 months. No other company in the sector, skilled nursing or seniors housing, or health care REITs for that matter, can beat that performance. Ensign does not make splashy acquisitions, just strategic onesie-twosie deals, primarily in its existing markets, and as far as we can tell, it does not overpay. Turnarounds is the name of the game for most of their acquisitions, and they seem to know what they are doing. So they are getting organic growth from the new properties after they take them over, plus the existing revenues and cash flow, combining for a win-win in most cases. If that settlement can’t slow the stock price rise down, we are not sure what will, other than a dry acquisition pipeline. And that is very unlikely....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 market always focuses on those transactions with low cap rates, and that is why so many people think cap rates for private pay seniors housing are in the 6% to 7% range. While deals obviously get done at these low levels, there are just as many at higher rates, but sellers don’t want to talk about them. In 2012, about 30% of the sales came with cap rates of 9.6% or higher, while 27% came with cap rates of 7.5% or lower. That means that 43% of the sales had cap rates that were between 7.6% and 9.5%, which actually produced an average for the entire seniors housing market (IL and AL combined) of 8.6% for the year. Makes perfect sense to us.....Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

In Memoriam

We learned that Abe Gosman, an industry pioneer and, at one time, the CEO of three publicly traded companies including a REIT, an assisted living company and a physician medical group company, died early this week in Palm Beach, Florida. Our thoughts and heart are with his family and friends.....Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

Free Trial to The SeniorCare Investor - Get instant access to the latest issue
Your free trial membership includes two monthly issues, plus the week’s senior care M&A deals, expert opinions – interviews with top executives, bankers and analysts, on today's hottest seniors housing topics, and access to Steve's Senior Care Blog. Visit http://www.levinassociates.com/freetrials to sign up now.

 

TOMORROW: Interactive Webcast:
Memory Care: (Unfortunately) A Hot Market
Thursday, October 24, 2013, 1:00 pm ET            
Whether constructing a stand-alone facility or repurposing a cluster of existing units to memory care, developers and providers alike are recognizing the opportunity for organizational growth while fulfilling a greatly increasing need. Find out more from our expert panel: Michael Smith (Moderator), Executive Director, Alzheimer’s Research Center of Connecticut, Inc.; Michelle Egerer, Senior Vice President, Community Operations, Silverado Senior Living; Letitia Jackson, VP of Health Services/Programs, Senior Star at Wexford Place; Curtis King, Vice President, Herbert J. Sims & Co.; Eric McRoberts, Partner, RLPS Architects.
Go to http://www.levinassociates.com/conferences/1310b-online-conference or call 800-248-1668 to register.

 

Around the Web in Senior Care M&A...Click here to see more

Webcast Calendar... Click here to see more

Upcoming Conference Partnerships... Click here to see more