We wrote a few months ago that American Realty Capital Healthcare Trust appeared to be going strategic in their deal making, meaning they were purchasing smaller one-off communities rather than the larger portfolio sales they were known for. In fact, in all of their deals before 2015 (going back to their first transaction in 2012), ARC averaged $52 million per transaction, but in the first 10 months of 2015, they averaged $13 million each. That is not to say the quality of the deals changed (they didn’t), just the size. However, ARC finished 2015 by announcing three transactions averaging $67.7 million per deal.
First, ARC-II purchased a portfolio of three assisted living/memory care communities with 295 units in the Little Rock, Arkansas area for $69 million, or $233,900 per unit, with a 7.25% cap rate. Built in 2000, 2006 and 2008, the assisted living/memory care communities are 98.8% occupied and almost all private pay. These are the highest quality assets in the market, and a 33% operating margin on $15 million of revenues reflects that.
Second, and ARC’s biggest deal of the month, the REIT (this time, ARC-III) acquired a 229-unit independent/assisted living community in Atlanta, Georgia for $78.6 million, or $343,200 per unit. Although relatively old, being built in 1987, the community recently received an $8.1 million renovation from the seller, a partnership between The Carlyle Group and Formation Development. Plus, occupancy was near 94%, and as the renovated units have been turning over, ownership has been able to charge higher rents. The Arbor Group will remain as the manager, and Lisa Widmier and Matthew Whitlock of CBRE handled the transaction. For Carlyle and Formation, which bought this property in 2012 for $27.5 million when occupancy was 70%, this was certainly a good investment.
And third, for ARC-II, was the acquisition of a 252-unit senior living community in Gresham, Oregon from a joint venture between a private equity firm and the operator. The seller originally bought the community, which was built in stages between 1996 and 2010 and features 208 IL units and 44 AL units, in December 2012 for $39.45 million, or 156,500 per unit. Then, after investing $2.4 million in renovations, they sold it this month for $55.5 million, or $220,200 per unit, with a cap rate estimated to be close to 6.0%. Occupancy was near 93% and the operating margin was 40% on $8.2 million of revenues. The seller was also represented by Lisa Widmier and Matthew Whitlock of CBRE, and the buyer hired Frontier Management to operate the community.
