In the midst of a turbulent Spring when AdCare Health Systems‘ board fired its CEO, Bill McBride for embellishing his resume (he said he received an MBA from UCLA, but apparently, he didn’t), the company still managed to add one more assisted living community to its now-30-property portfolio. Closing its first acquisition since it become solely a landlord, AdCare originally announced a letter of intent to purchase the community back in February, but closed on the deal just this month. Located in Glencoe, Alabama, it was built in 1985 with 52 assisted living units and recently (in 2012) added a 33-unit memory care portion. This was the only seniors housing asset of the seller and could definitely improve operations. Occupancy was around 85%, and the community pulled in approximately $430,000 in EBITDA, or just about $5,000 per unit, per year. To put it in perspective, the average for the seniors housing industry for properties sold, which includes assisted living and independent living, in 2016 (according to the Senior Care Acquisition Report) was around $12,900 per unit, per year.
It should help that to operate, AdCare brought in an affiliate of C.Ross Management, which already manages the adjacent high-acuity skilled nursing facility. The lease features initial annual cash rent of $450,000 in the first year and 2% annual escalators. Those lease payments will certainly motivate AdCare/C.Ross to quickly improve the operating margin. The community sold for $5.5 million, or $64,700 per unit, with a 7.8% cap rate. AdCare financed the deal with a $4.1 million conventional mortgage (featuring a five-year term and annual interest rate of 4.5%), and Brooks Blackmon of Blueprint Healthcare Real Estate Advisors handled the transaction.
