The Dealmakers Forum E-Newsletter, May 14, 2014 - LCB Senior Living continues to expand in the Northeast, Cap Rates

 

Bringing You Senior Care M&A Deals and News
 

May 14, 2014 Issue:

Seniors Housing Weekly Update: 60 Seconds with Steve Monroe
Where Senior Care Meets Technology. The Aging2.0 Global Innovation Summit kicks off in San Francisco............ Read More   

 

Recent Senior Care M&A Deals
Long-Term Care
   
Acquirer
Target
Price
Four SNF's in TX
$53.7 million
Three SNF's in CA
$13.4 million
One SNF in TX
$3.6 million
One SNF in AZ
N/A
One ALF and one SNF in CA
N/A
N/A
Regional Owner/Operator
$23 million
Focus Healthcare Partners LLC
$35.5 million                              

Deal of the Week

Sometimes when you buy a portfolio, there is a property (or two) that is either an outlier or you had plans for it that maybe didn’t work out as intended. Such was the case five years ago when Trilogy Health Services bought a portfolio of properties in Indiana and Kentucky, two states it already operated in, plus a one-off senior living property in Illinois. The company had plans to expand in Illinois, but the right opportunities never materialized. Consequently, Trilogy finally decided to divest the community, which includes 110 skilled nursing beds (built in 1989), 34 assisted living units (built in 1999) and 26 memory care units (built in 2009). Overall occupancy was just over 80%, but the memory care portion was at 95%. The community was very profitable, but it was the right time to sell. The purchase price was $23.0 million, or $135,300 per bed/unit, and the cap rate was 11.2%, an appropriate blend of skilled nursing and assisted living cap rates. Ryan Saul of Senior Living Investment Brokerage handled the transaction............ 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

LCB Senior Living continues to expand in the Northeast. It just closed on the acquisition of an 86-unit assisted living community in Massachusetts that is housed within a converted school that is on the National Registry of historic buildings. It was converted to its present use in 1997. To close the acquisition, Cushman & Wakefield Equity, Debt & Structured Finance arranged both the debt and equity. The mortgage financing of $13.5 million was provided by M&T Bank, while Virtus Real Estate Capital put up about $6.1 million of equity. The total capital raised exceeds the approximate purchase price of just over $190,000 per unit because LCB plans to convert a portion of the units on the first floor to memory care, as well as complete interior upgrades and a repositioning of the entrance from the back of the building to the front where is was originally located when the school was built in 1927. We suspect that the licensed capacity will be increased once the changes have been made, and with the memory care addition, occupancy should jump from the high 80% area to 95% or higher................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 of the constants in the acquisition market for a few decades has been the average cap rate for skilled nursing facilities. Regardless of interest rates, the average cap rate has been between 12% and 14%, but usually between 12.5% and 13.5%. We can dig down further by looking at the spread between the SNF cap rate and the 10-year Treasury rate. In the last six years, that spread has ranged from 920 basis points (2008) to 1070 basis points (2012). But the recent consistency has been unusual, with a spread of 1070 basis points in 2012 and 1060 basis points in 2013, when interest rates had the sudden spike up in the middle of the year. The only time when the spread has been significantly outside the normal range was in both 2006 (770 basis points) and in 2007 (750 basis points), which was the last acquisition market peak before the Great Recession............Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

 

GE Capital, Healthcare Financial Services provides tailored healthcare real estate financing solutions
Responding to our customers’ needs, GE Capital, Healthcare Financial Services provided more than $2.8 billion in financing for senior housing, skilled nursing and medical properties in 2013. That kind of commitment—along with our innovative, individually tailored financing solutions—is what makes us leaders in healthcare real estate financing. Stop just banking. And start building.

Learn more.

 

Healthcare & Real Estate 2014: June 5
Are you active or looking to become active in the exciting healthcare real estate niche? Join Greater Chicago & the Midwest region’s most active healthcare real estate executives on June 5. Healthcare & Real Estate 2014: Chicago will shed light on important trends in healthcare that will impact and change demand drivers for the underlying real estate assets. Click here for more information.

 

 

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