Private investor sees potential

A pair of skilled nursing facilities in Texas that pulled in more than $12.5 million in total revenue but only retained approximately $500,000 in EBITDA (an operating margin of just 4%) presented an appetizing turnaround opportunity to buyers when it was put on the market. Owned by a public REIT and leased to a third party operator with which the REIT had a larger relationship, the properties included a 160-bed facility in Houston and a 149-bed facility in Mesquite. In addition to their low occupancy (collectively at 75%) and quality mix (at just 15%), the facilities also had age going against them, with the Houston facility built in 1970 and the Mesquite facility in 1977. However, to a new buyer, the 143 dually certified beds at the Houston facility and the 138 dually certified beds in Mesquite presented an opportunity to improve on the quality mix. In the end, a private investor with a national presence as a skilled nursing landlord purchased the facilities for $10 million, or approximately $32,400 per bed, with a 5% cap rate on trailing cash flow. Concord Healthcare Group will manage the facilities, and Ben Firestone of Blueprint Healthcare Real Estate Advisors handled the transaction.