A Southern California-based regional operator is heading north, to Petaluma (about 40 miles northwest of San Francisco), to acquire and take over management of a 40-unit memory care community. Previously owned by a TIC investor, who decided to divest the asset to realize their investment objectives, the community was built in 1996 on a 1.68-acre plot.
Recent minimum wage requirements and increased competition caused the community to raise wages. Adding to its woes, community leadership was unstable, leading the community to expend significant overtime to deal with the vacant positions. These issues combined to affect its financial performance, with the operating margin at just 14% on over $3.6 million of revenues, despite strong occupancy at 91%.
The new Southern California owner/operator plans to invest considerable capital into the building, which could, we imagine, lead to an increase in rents to make up the rising costs. Jeff Binder, Brad Clousing, Jason Punzel and Brad Goodsell of Senior Living Investment Brokerage sold the community for $9.6 million, or an impressive $240,000 per unit, at a 5.3% cap rate.