The Dealmakers Forum E-Newsletter, December 10, 2014 - Brinton Woods buys turnaround property in D.C. market

 

Bringing You Senior Care M&A Deals and News
 

December 10, 2014 Issue:

Seniors Housing Weekly Update: 60 Seconds with Steve Monroe
Health Care REITs Continue To GainREITs are hitting 52-week highs, and may have room to move............. Read More   

 

 

Recent Senior Care M&A Deals
Home Health Care & Hospice    
Acquirer Target Price
Epic Health Services, Inc. Nurses to Go, LLC N/A
Allegheny Health Network Klingensmith HealthCare N/A
Long-Term Care    
Senior Living Communities, Inc. 8 CCRCs $435 million
National Health Investors, Inc. 8 CCRCs $476 million
Meadowbrook Senior Living $60 million
Pacifica Lauderhill, LLC Forest Trace $18.5 million
CNL Healthcare Properties Fairfield Village of Layton N/A

 

Deal of the Week 

Brinton Woods Senior Living is about to close on its second skilled nursing facility in the Washington, D.C. market. It recently received approval to purchase a 183-bed not-for-profit facility in a deal expected to close on January 1. The facility was built in 1982 with 63,000 square feet, but with occupancy of just 80% it had been operating at a $500,000 loss on $16.2 million of annual revenues. That is going to change with the new owners, who have been operating another facility in D.C for the past two years that is a similar size. In two years they expect occupancy to increase to 94% and revenues to increase to $18.5 million with a 12% margin after a management fee. That will be a home run. Capital Funding is providing about $10.27 million in bridge financing that is expected to be taken out by HUD once the operating and financial improvements have been made. The purchase price came in at $9.5 million, or $51,900 per bed, and if the forecasts are realized, the value should jump to over $90,000 per bed..........................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

Omega Communities, a for-profit, Birmingham, Alabama-based developer of faith-based senior living communities, is partnering with The Church of Hope, which has a membership of approximately 4,000 people, to build a 106-unit assisted living/memory care community on the church’s campus in Sarasota, Florida. Church of Hope entered into a long-term ground lease agreement on the 10-acre parcel with Omega in exchange for a percentage of the net income from the property and for the ability to serve and minister to the staff of the community. To finance the project, Omega turned to HJ Sims to structure a $21.6 million bond issue through an existing investor relationship of Sims. Omega wanted to reduce both the interest rate cost and the negative arbitrage associated with a traditional tax-exempt bond issue. The bond investor agreed to a waiver of a requirement of a debt service reserve fund, lowering the amount of debt by approximately $2.4 million. With the lower debt, Sims sold the bonds with a 7.5% interest rate (down from 7.9% which assumed a fully funded debt service reserve), thereby increasing the projected debt service coverage ratio from 1.40 to 1.55. As a result of this financing, Omega was not required to put in additional equity in the project. The community, named Fountains of Hope, will feature 68 AL and 38 memory care units, costing approximately $20.2 million, and is expected to be completed in the third quarter of 2015. Robert Gall of HJ Sims was the senior banker on the transaction. Omega also has another community under construction in Sarasota County, to be named The Springs at South Biscayne Church, which will feature 133-units (95 AL and 38 memory care), costing about $24.5 million, and is expected to be completed in the spring of next year. HJ Sims also provided financing for The Springs, including a $21.8 tax-exempt senior drawdown bond issue purchased by a single investor and a $2.7 million tax-exempt subordinate bond issue. We also just want to mention that we have been hearing about a lot of development in the Sarasota area, especially in AL/MC communities. Another AL/MC community in Sarasota is under construction with a late 2015 opening, and a local CCRC is planning to add a new building with AL units. The last ones to open may face some fill-up issues...........................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

Two weeks ago, we looked at the average number of units per facility for assisted living communities, memory care communities and combined assisted living/memory care communities, using data from our new development database. For AL, we found the average to be 74 units per community, 46 units for stand-alone MC and 90 units for combined AL/MC. But what are developers paying, on average, to build these types of communities? We found that developers put more money into developing memory care than they do for assisted living. Stand-alone memory care communities cost on average $198,800 per unit to develop, while AL communities are $179,200 per unit and combined AL/MC are $191,700 per unit. The higher cost of memory care may be partially explained by the fact that many of the stand-alone MC facilities are more “boutique” (with on average 30 fewer units than AL communities) and often cannot be built as cost-efficiently as a larger community. Developers also spend a good deal on memory care-specific design features and technologies, which add to overall development costs. For comparison, independent living communities cost almost $260,000 per unit, which makes sense given the larger unit sizes and plethora of amenities..........................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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