The Dealmakers Forum E-Newsletter, December 3, 2014 - Joint venture buys two Louisiana AL/MC communities with room to expand

 

Bringing You Senior Care M&A Deals and News
 

December 3, 2014 Issue:

Seniors Housing Weekly Update: 60 Seconds with Steve Monroe
Health Care REIT Sells, NHI Buys, Eight CCRCsHealth Care REIT is selling eight CCRCs to its tenant, who is re-selling them to National Health Investors............. Read More   

 

 

Recent Senior Care M&A Deals
Long-Term Care    
Acquirer Target Price
REIT/Florida-based regional operator Two Lousiana AL/memory care communities $12.7 million
Not disclosed Grace Lodge Assisted Living

$4.3 million

Not disclosed Whispering Oaks Assisted Living $2.5 million
Senior Living Communities 8 CCRCs $435 million
National Health Investors 8 CCRCs $476 million
American Realty Capital Healthcare Trust-II Meadowbrook Senior Living $60 million

 

Deal of the Week 

A joint venture between Sentio Healthcare Properties and Superior Residences recently bought two Louisiana assisted living/memory care communities with plenty of room to expand and improve operations. The communities, one in Hammond and one in Slidell (both about 20 miles north of New Orleans across Lake Ponchartrain), were built in 1999 and 2000, respectively, and feature all private rooms. The Hammond community has 44 units, with 31 AL units and 13 memory care units, while the Slidell community recently underwent a partial conversion to memory care and now has 26 AL units and 24 memory care units. The JV paid approximately $12.7 million for the portfolio, or $135,000 per unit, and the cap rate was aggressive, at around 4.3% based on reported EBITDA at the time of the sale, which closed in mid-November. However, when looking at projected financials for 2014 and early 2015, the cap rate is closer to 8.9%, which shows the upside in the portfolio. In fact, occupancy at the Slidell community, which was still filling up its memory care units at the time of the sale, has already risen from 70% at the time of the sale to close to 100% today. Plus, at the Hammond property, which is currently 99% occupied, there is room to expand, with plans to add 22-24 units (mostly memory care) in the early stages of development. The seller was a private equity group based on the East Coast (which also managed the property with its wholly owned management company) which bought the two properties in August 2011 for $8.3 million. Superior Residences is based in Florida and operates senior living communities throughout Florida, more than half of which are stand-alone memory care communities. It will operate the two properties under a lease with Sentio. Ben Firestone and Michael Segal of Blueprint Healthcare Real Estate Advisors were the lead advisors on 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

Time is money, and waiting for construction financing can be a serious issue for developers antsy to build. Lancaster Pollard’s Tom Gale, based out of the Philadelphia office, bypassed HUD’s lengthy new construction queues to provide long-term, non-recourse funding for HHHunt, a large provider and active developer of AL and memory care projects throughout the mid-Atlantic, to construct a 79-unit AL/MC community in Fredericksburg, Virginia and a 78-unit AL/MC community in Severna Park, Maryland. The FHA Sec. 232 new construction firm application queue length at the time of submission was in excess of 12 months. So, Gale took HHHunt’s loan through HUD’s Early Commencement approval, allowing the developer to start construction at both sites prior to the loan closing, with interim construction financing provided by StellerOne Bank (now Union First Market Bank) for Fredericksburg and by M&T Bank for Severna Park. As a result, the Fredericksburg community was completely built and already leasing before its $14.1 million HUD loan closed. Meanwhile, the Severna Park community was about 40% complete by the time its $20.3 million HUD loan closed. Both loans are non-recourse and have low fixed-rate 40-year terms. HHHunt also obtained reductions in ongoing reserve requirements, which will generate perpetual savings. The communities received favorable valuations as well, which limited HHHunt’s equity requirement for the projects as much as possible under HUD requirements..........................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

There was a very clear reason why the independent living market set a record last year of an average price of $191,950 per unit and a median price of $199,300 per unit. It all came down to cash flow. The average net operating income (EBITDA) per unit sold for independent living communities was $13,500 compared with $10,500 per unit in 2012. That represents a whopping 28.6% increase year over year. Approximately 60% of these primarily independent living communities had assisted living or memory care units, which boosted market demand and most likely helped occupancy and thus cash flow. High quality portfolios that were sold also pushed prices and the cash flow, with at least one sale over $400,000 per unit. But it all came down to what was going to the bottom line, and the buyers were paying up for it.........................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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