The Dealmakers Forum E-Newsletter, January 21, 2015 – Florida operator pays high price for turnaround SNF

 

Bringing You Senior Care M&A Deals and News
 

January 21, 2015 Issue:
Seniors Housing Weekly Update: 60 Seconds with Steve Monroe
Ventas Closes ARC Deal: American Realty Capital Healthcare Trust shareholders trade their shares for Ventas shares……………. Read More   
 

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Recent Senior Care M&A Deals

Home Health Care & Hospice

 

 

Acquirer

Target

Price

Epic Health Services

Loving Care Agency, Inc.

N/A

Civitas Solutions, Inc.

Cassel & Associates

N/A

Civitas Solutions, Inc.

Lakeview Systems’ programs

N/A

Civitas Solutions, Inc.

Capstone Services

N/A

Air Liquide

Optimal Medical Therapies

GmbH & Co.

N/A

Long-Term Care

 

 

Cropsey Properties

Sephardic Home for the Aged

$36 million

Individual

Lake Alhambra Assisted Living

$2.75 million

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Deal of the Week 
Although readers might be thinking that skilled nursing facilities that are losing money have to be located in New York in order to sell for high prices, but that is just not the case. A not-for-profit nursing facility in Jacksonville, Florida recently sold for $11.0 million, or approximately $91,700 per bed, which is well above national average. The 120 beds were built in 1992, so it was relatively new, but occupancy was just 87% with a small 6% Medicare census. It was operating with a slightly negative EBITDA, and with a physical plant that is in good condition with plenty of room for an increase in higher acuity Medicare patients (close to 450 square feet per licensed bed), the buyer is obviously counting on a more profitable census. This was the only skilled nursing facility of the not-for-profit seller, so we assume there was a lack of management sophistication. But the buyer, Florida-based Cross Senior Care, has nine other locations in Florida, so they have plenty of experience to turn this asset around. Bradley Clousing of Senior Living Investment Brokerage handled the transaction…………………………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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Financing of the Week
KeyBank’s Healthcare Mortgage Banking team, led by Carolyn Nazdin and Charlie Shoop, closed a $334.4 million Fannie Mae loan ($140,740 per unit) in less than 60 days for Chicago-based Enlivant, formerly Assisted Living Concepts. Secured by 54 assisted living properties (with 2,376 units) across 12 states, the 10-year loan is a Fannie Mae “credit facility” product, which gives Enlivant the flexibility to receive more growth capital in the future. The facility at closing refinanced existing CMBS debt and other capital invested in its November 2014 acquisition of 16 struggling assisted living properties with 615 units that it had been leasing from LTC Properties, for $26.5 million, or approximately $43,000 per unit. Since the deal closed in December 2014, Enlivant owns and operates 100% of its properties as it continues to reinvent and improve itself since rebranding the company last March………………………….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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Stat of the Week
During one of our webinars last year on buying and valuing senior living properties, we put up a graph comparing the average seniors housing cap rate (independent and assisted living combined) with the average 10-year Treasury rate. But a funny thing happened during the Q&A. Someone told the audience that people don’t determine a price based on what the 10-year Treasury rate is, nor do they look at the spread between that rate and the “going” cap rate. While we agree that all buyers have different return expectations, so they buy with different cap rate assumptions, we do not agree that buyers don’t keep their eye on the Treasury rates. In the seniors housing acquisition market, the spread between the average cap rate and the average 10-year Treasury rate ranged between 610 and 680 basis points from 2009 to 2013. That demonstrates strong consistency. In three of those years, the spread was between 610 and 620 basis points. So we find it impossible to have that level of consistency if buyers aren’t checking that rate and the spread off that rate when valuing and buying a property. Could it be coincidence? Hardly, and in several weeks we will have the 2014 numbers to add to the mix in our next Senior Care Acquisition Report. And with Treasury rates still declining, cap rates should compress further……………………….Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today
 
 
EXPERT OPINION: A Conversation with Laca Wong-Hammond
In this Expert Opinion, Laca Wong-Hammond, Managing Director, Duff & Phelps, discusses predictions for 2015, long-term care, and foreign investment in U.S. health care assets……..Watch the video
 

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