The Dealmakers Forum E-Newsletter, March 25, 2015 - Higher Medicaid rates boost price for SNF portfolio

 

Bringing You Senior Care M&A Deals and News
 

March 25, 2015 Issue:

Seniors Housing Weekly Update: 60 Seconds with Steve Monroe
The Battle For BrookdaleShareholders are taking it up a notch to raise the value of Brookdale Senior Living................... Read More   

 

 

Recent Senior Care M&A Deals
Home Health Care & Hospice    
Acquirer Target Price
UPMC Family Hospice and Palliative Care N/A
Long-Term Care    
Independent owner/operator Silver Hills Assisted Living $2.54 million
HCPBrookdale Senior Living 35 senior housing communities $849 million
Investor group 3 Oklahoma skilled nursing facilities N/A
Oxton Senior Living Shadowmoss Plantation N/A

 

Deal of the Week 

Four skilled nursing facilities in South Carolina sold for a higher than expected price, given their higher average age and lower quality mix. The portfolio, dubbed Health Care Corporation, includes a 120-bed SNF in Saint Matthews, a 104-bed facility in Cheraw, a 142-bed facility in Lancaster and an 88-bed facility in Spartanburg, for a total of 454 beds. They were all built between 1973 and 1990, for an average age of about 33 years, and had an average quality mix of about 17% across the portfolio.

 

So why did these facilities sell for $27.5 million, or $60,600 per bed, reflecting a slightly below market cap rate of 11.6%? The facilities were anticipating Medicaid rate increases in 2015, which would add about $1.1 million to the portfolio’s trailing 12-months EBITDA. On top of that, the facilities are on average 93% occupied, so the new owners, assuming operations remain normal, should be able to really capitalize on the increased rates. Without adjusting EBITDA and using the 11.6% cap rate, the purchase price would be closer to $18 million, or about $40,000 per bed. After a competitive bidding process, a regional owner/operator emerged as the buyer. Evans Senior Investments represented the seller in 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

You may remember NorthStar Healthcare Income’s purchase of The Arbors portfolio, which consisted of four assisted living communities on New York’s Long Island, for $125 million, or $219,300 per unit. To finance that acquisition, NorthStar announced just this week that it turned to KeyBank Real Estate Capital to provide $93.75 million in four Fannie Mae loans. Monique Bimler of KeyBank’s Healthcare Mortgage Banking Team facilitated the financing.

 

In addition, KeyBanc Capital Markets® arranged a $100 million revolving credit facility, which came with an accordion feature to increase the facility up to $200 million. NorthStar plans to use that facility to finance its real estate investments and first mortgage loans secured by healthcare real estate. KeyBank National Association acted as the administrative agent of the facility......................................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

Cap rates on skilled nursing transactions have been historically stable, especially compared to the slightly less steady assisted living and independent living market, hovering between 12.0% and 13.5%. While still staying within that range this year, 2014’s average fell by 60 basis points to 12.4%, after a 50 basis point rise from 2012 to 2013. The average in 2014 is not the lowest average cap rate we have seen in skilled nursing (that coming in 2007 at 12.1%), but this is one of the steepest declines, driven largely by the increased demand for higher acuity facilities and increasing Medicare census. We have also derived a bed-weighted average cap rate for skilled nursing, which you can find in the just-published 2015 Senior Care Acquisition Report....................................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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