ALF with upside sells

A 60-unit assisted living community in Columbus, Georgia that was not fulfilling its revenue potential sold to a private investment group for $4.85 million, or $80,800 per unit. Built and owned by the not-for-profit St. Francis Hospital since 1999, the community had historically struggled with occupancy, until in 2006, it leased a wing of 14 units on the second floor to VistaCare, Inc., an unaffiliated hospice company. That move helped bring occupancy up to 97%, but at the same time it was tough to turn a profit, with an average rent received from VistaCare of $2,150 per unit per month based on a base rent plus a PPD reimbursement. At the time of the sale, the community was operating at just a 2.5% margin on $1.58 million in trailing-12 month revenues. However, there is some operational upside. The lease with VistaCare may be cancelled without cause within one year by providing notice at any time, thereby freeing up 14 units to market rent. And by cutting expenses incurred by the nonprofit hospital owner, pro forma revenues and EBITDA, assuming the lease is terminated, could quickly reach up to $1.87 million and $280,000, respectively, which would result in a transactional cap rate of 5.8%. Evans Senior Investments represented the seller in the transaction.