It’s not often we see a senior care facility sell for under $15,000 per bed, especially when that facility is majority AL, with a smaller SNF component. It’s also rare to see a facility with a combined occupancy of 82% and a 20% Medicare census at the SNF. Nevertheless, a facility just like that in Corona, California sold for $2.5 million, or $11,200 per bed. Just how could a facility with adequate occupancy and a decent Medicare census sell for so low a price? Well, that was what the operations went for without the real estate…yet. The owner, who previously owned a number of other SNFs in the area but has since lost them all to bankruptcy, had a history of hiring friends and family at higher paygrades, and, clearly, did not manage the facilities well.
The Corona facility is located in a rough area of Riverside, California, and has somewhat fallen into disrepair. Plus, on approximately $7.8 million in annual gross revenue, it was losing around $120,000 in EBITDA a month. In fact, during the sales process (which only lasted 21 days), a bridge loan had to be taken out just to keep the facility afloat. Shep Roylance of JCH Consulting Group handled the transaction, and ended up selling the facility to the stalking horse bidder, Shlomo Rechnitz, who is California’s largest nursing home operator with over 8,000 beds in the state alone. Mr. Rechnitz plans to invest in major capital improvements and increase the quality mix by focusing on the rehab portion of the business. He is also in the process of purchasing the real estate from the landlord. Hopefully, Mr. Rechnitz can turn the property around, quickly.
