The Dealmakers Forum E-Newsletter, October 29, 2014 - In frothy market, acquisition with upside

 

Bringing You Senior Care M&A Deals and News
 

October 29, 2014 Issue:

Seniors Housing Weekly Update: 60 Seconds with Steve Monroe
Issues In Seniors Housing Occupancy: Occupancy is one of the most watched statistics in seniors housing, but it doesn't tell the whole story............ Read More   

 

 

Recent Senior Care M&A Deals
Home Health Care & Hospice    
Acquirer Target Price
Accelera Innovations, Inc. Advance Lifecare Home Health N/A
Long-Term Care    
Not Disclosed Gracious Living Estates $3.1 million
Aviv REIT, Inc. 2 skilled nursing facilities $28.5 million
 

 

Deal of the Week 

SilverStone Health Care Real Estate, LLC, recently formed by Stephanie Anderson and Frank Small, recently closed on its second acquisition. The property is an 84-unit assisted living community in a high-end suburb of Dallas, Texas with 65 AL units and 19 memory care units. The community opened in 2010, which was not a good time in the market, and after initially struggling, occupancy is now at 95% and higher with base rates averaging close to $5,000. Financial details have not been disclosed, but we have estimated the price to be near $225,000 per unit, which makes sense for a full, new assisted living community in a good market. But we also believe that operating costs may have been running high with a small operator managing the community. Based on the current rates and what we believe may be a sub-25% operating margin, the cap rate was probably close to 7.5%, which alone is somewhat high in this market for this quality, age and census. But when costs are managed downward, we believe the operating margin should grow to more normal levels of 30% or higher. That means they are looking at a “buyer’s cap rate” of closer to 9% to 10% for their first year of operation. But the story goes on. This property is the first phase of a three-part development, with part two being a 60-bed skilled nursing facility currently under construction, and SilverStone is partnering 50-50 with the developer. There is also a 1.4-acre site entitled for either 48 AL or IL units. So this acquisition may be the gift that keeps on giving. The acquisition was financed by Grandbridge Real Estate Capital through its affiliate BB&T Bank.................... 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 acquisition financing, Aron Will, SVP of CBRE’s Senior Housing Debt & Structured Finance team, secured a $23.1 million loan from a regional bank for a joint venture between Care Investment Trust and Greenfield Senior Living, to acquire a portfolio of three senior living communities. The properties, totaling 360 units which include independent living, assisted living and memory care, are located in Arlington, Texas, Oak Ridge, Tennessee and Richmond, Virginia. Virginia-based Greenfield, a regional owner/operator of 14 communities with 1,150 units across the South and Mid-Atlantic, provided the Tennessee community to the venture, which was already stabilized (with 88% occupancy), while the other two properties were turnaround communities (with 76% occupancy for the Arlington community and 75% occupancy for the Richmond community) from third party sellers. As a result, the loan came with a $2 million earn-out feature, to be received upon reaching a certain debt yield. The loan has a five-year term at a 70% loan-to-cost with 36 months of interest only. Also, because of the varying levels of stability in the properties, the portfolio will be cross-collateralized and cross-defaulted. CBRE secured non-recourse quotes from five other lending sources. Greenfield will manage the portfolio, and the JV plans to make capital improvements to better accommodate higher acuity residents. Care Investment Trust, an affiliate of Tiptree Financial Inc. (NASDAQ: TIPT), is a real estate investment and finance company that invests in seniors housing real estate.....................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

Demographic numbers can be used and misused to justify or explain many things.  Take the growing elderly population. From 2010 to 2013, the 80 plus population is expected to increase by 64.7%, or by more than 7.4 million elderly. This is a big demographic movement and one that is often cited for the potential for seniors housing development.  But from 2010 to 2020, the increase is just 11.8%, or 1.35 million elderly. The target market is beginning to change to the 85 plus age group for assisted living and memory care as the elderly are aging in much better health than in the past. This age group is expected to increase by 14.7% from 2010 to 2020, or a smaller 846,000. But the largest absolute change in both the 80 plus population and the 85 plus population comes between 2030 and 2040, with increases of 8.65 million and 5.45 million, respectively.  The question is, what will these aging baby boomers really want?....................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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