Joshua Jandris, Mark Myers and Charles Hilding of IPA Seniors Housing represented Morris County (New Jersey) in leasing its 283-bed skilled nursing facility in Morristown. The four-story facility had been struggling, losing as much as $3.8 million in annual EBITDA per year. It didn’t help that the county outsourced all aspects of operations. The facility is also on the older side (built in 1973 and 1993) and features a roughly 60% Medicaid census. The financial strain put on the county prompted officials to look for a solution.
After a lengthy search, IPA arranged for Allaire Healthcare Group to lease the facility from the county under a 15-year term, with 2.0% annual escalators and $2.25 million in initial cash rent. While there is a lot of work to be done, the facility currently earns over $30 million in annual revenues, so in assuming a modest 10% operating margin, there is certainly upside from Allaire’s perspective. Bringing operations in-house, instead of hiring out to third-parties, should improve margins.
But, this won’t be Allaire’s first swing at a county-owned skilled nursing facility, having acquired a 174-bed facility from Monomouth County (also in New Jersey) at the end of 2015 for $17.4 million, or $100,000 per bed. That transaction was also handled by the team at IPA, and we hear operations have improved since the take-over.