The Dealmakers Forum E-Newsletter, April 15, 2015 - Another Holiday portfolio sells to a REIT

 

Bringing You Senior Care M&A Deals and News
 

April 15, 2015 Issue:

Seniors Housing Weekly Update: 60 Seconds with Steve Monroe
The Ventas Spin-off Has People TalkingThere are differing opinions as to what motivated Ventas to spin out most of its skilled nursing portfolio.................... Read More  

 

 

Recent Senior Care M&A Deals
Long-Term Care    
Acquirer Target Price
Ownership group Michael A. Malotz Skilled Nursing Pavillion $22.7 million
MedEquities Realty Trust 5 senior care communities $80 million
ROC Seniors Housing Wyndemere N/A
Avemere Cascade Park Care Center N/A
ROC Seniors Housing 4 assisted living communities $70 million (approx.)

 

Deal of the Week 

So goes another large portfolio of Holiday Retirement properties, with NorthStar Realty Finance’s acquisition of 32 independent living communities from affiliates of Harvest Facility Holdings, itself an affiliate of Holiday. The acquisition marks another step towards Holiday’s owner Fortress Investment Group’s goal of transforming Holiday into an operating company. In fact, since October 2013, Holiday has sold over 200 properties totaling about $5.1 billion. In that time, nearly all of those assets were sold to REITs, such as New Senior Investment Group, Sabra Health Care REIT, National Health Investors and Ventas, and that is no different in the most-recent transaction.

 

NorthStar Realty Capital (a publicly traded REIT), together with NorthStar Healthcare Income (a public, non-traded REIT) will own 60% and 40%, respectively, of the portfolio, which includes about 3,983 independent living units in 12 states. The joint venture entities will operate the portfolio as lessees or managers, and it will tap Holiday and its affiliates to manage or sub-manage some properties in the portfolio. To finance the transaction, the joint venture plans to fund between 70% and 75% of the purchase price with 10-year, fixed rate debt. Under the terms of the agreement, the buyers will have until June 30, 2015 to close the transaction, paying $875 million, or $219,700 per unit. In the other REIT sales, the price per unit has ranged from $171,600 to $268,300..........................................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

Monarch Senior Living is trying something new in seniors housing development. The company acquired a vacant 17,800 square-foot medical office building (MOB) in La Jolla, California for $7.115 million, which it plans to convert into a 26-unit/44-bed memory care community. Monarch will own the community with Menlo Park, California-based real estate equity sponsor HG Capital, and will also manage it upon completion.

 

To fund both the purchase and the repurposing of the building, Aaron Beck of NorthMarq Capital arranged a five-year $9.96 million first mortgage loan for Monarch. The financing featured interest-only payments, a floating rate and minimal recourse so as to give the joint venture flexibility throughout the renovation process. MidCap Financial provided the loan. It will be interesting to see if any other operators or developers will look to do the same thing with empty MOB space..........................................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

The average cap rate largely depends on the properties that sold. Even in a year when valuations rise and cost of capital remains low, cap rates may actually rise because the communities sold were of lesser quality. That factor has played a key role in determining the average cap rate for independent living communities in the last two years. In 2013, there were more low-quality, small properties that sold, which drove the average cap rate for the year up 20 basis points to 8.2%. However, there were more quality independent living communities sold in 2014, which helped decrease the average cap rate by 80 basis points to 7.4%. What most likely happened is that owners of these prime properties, who may not have been looking to sell before, were wooed by the valuations seen in today’s market......................................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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