The Dealmakers Forum E-Newsletter, August 27, 2014 - Assisted Living Community in Carmel, California Sold

 

Bringing You Senior Care M&A Deals and News
 

August 27, 2014 Issue:

Seniors Housing Weekly Update: 60 Seconds with Steve Monroe
Federal Regs and the 5-Star Rating System: The Medicare 5-star rating system for skilled nursing facilities may not be all that it is cracked up to be............ Read More   

 

Weekly Senior Care Deals
Long-Term Care    
Acquirer Target Price
Genesis HealthCare Skilled Healthcare Group, Inc. $710 million
The Freshwater Group The Cottages of Carmel $24.5 million
Health Care REIT, Inc. HealthLease Properties REIT $950 million
Health Care REIT, Inc. 11 UK seniors housing properties $257 million
LCB Senior Living, LLC 2 Vermont properties $82.4 million
$520 million

 

Deal of the Week

Location, location, location. That may sum up the recent acquisition by The Freshwater Group (TFG) and HJ Sims of a 57-unit assisted living and memory care community in Carmel, California. It took well over a dozen years for the original developer to get the property entitled, so we assume there will not be much new competition coming into the market anytime soon. The community was finished in 2011 and it has 41 assisted living units and 16 Alzheimer’s units. Occupancy has increased from about 65% a year ago to 87% at the time the sale closed. The seller was in arrears on the $21.67 million HUD mortgage, which was assumed by the buyer, so as part of the acquisition they had to bring the loan current. Fortunately, the interest rate had been reduced to 4.37% inclusive of the MIP. There were some additional costs, bringing the purchase price up to approximately $24.5 million, or a California high of $430,000 per unit. The Freshwater Group, through its Watermark Retirement Communities affiliate, expects to increase occupancy to at least 93% and EBITDA to $2.0 million. Given its age and location, this could be one of those sub-6% cap rate acquisition candidates down the road, implying a future value of $580,000 per unit or higher. Carl Mittendorff of TFG negotiated the deal.............. 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

In what seems to be a growing trend in the senior housing finance world, a life insurance company provided a $20 million loan to Stave Properties, LLC to refinance Mountain View Retirement Village, a 188-unit best-in-class seniors housing community in Tucson, Arizona that offers both independent (102 units) and assisted living (86 units) services. The loan came to $106,400 per unit. Brandon Harrington and Matt Steffen of Walker & Dunlop’s Phoenix office, arranged the loan, which has an aggressive 10-year fixed rate term and a 30-year amortization. The desert property was built in 2000, has a swimming pool, exercise room, beauty salon, restaurant-style dining services, spacious rooms, and as the name suggests, beautiful mountain views. The community is in a good financial position as well, boasting a stable occupancy in the mid-90% area and a good location near a hospital. It was the borrower’s first time working with Walker & Dunlop, a leading provider of commercial real estate financing solutions nationwide. We hope to see more life insurance companies coming back to the seniors housing market..............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

How important is it to keep your expenses down? Very important, if you are concerned about maintaining your asset value. In 2013, the average price per unit in the seniors housing market (independent and assisted living combined) in those sales where the expense ratio was greater than 75% (operating margin below 25%) was less than one-third the average price for those with an expense ratio below 65%. The higher operating cost communities sold for an average of $70,100 per unit while the lowest operating cost communities sold for an average of $233,300 per unit. Those expense ratios seemed to be the big dividing point, as sale of communities with a 65% to 69% expense ratio sold for an average of $156,100 per unit and those with a 70% to 75% expense ratio sold for an average of $136,900 per unit. Not too coincidentally, the median sales price in 2013 for all seniors housing communities fell between these two levels...............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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