Ryan Saul of Senior Living Investment Brokerage closed out the month with two Midwest transactions. First, he sold a struggling SNF in St. Charles, Illinois. At 40-years old, the 120-bed facility struggled with cash flow (losing over $1 million in EBITDAR), while occupancy stood at just 58%, with a 55% Medicaid, 28% private pay/insurance and 17% Medicare census. Its Wisconsin-based private owner (who is retired and elected to sell for estate planning purposes) had leased the facility for many years to a not-for-profit. But after the recent affiliation with another not-for-profit health system, they did not want to operate long-term and decided to terminate the lease and transfer operations to the new owner, a private company based in Illinois with other facilities around Chicagoland.
They couldn’t get out of there fast enough, apparently, because during the contract stage it was discovered that FF&E was not included with the building as it belonged to the previous tenant. So, at closing, the seller credited the buyer $1.5 million for capital repairs and all FF&E to operate the facility. In addition, the buyer plans to significantly invest in the facility’s physical plant to improve the quality mix. In the end, the facility sold for $5.5 million, or $45,800 per bed.
Then, Mr. Saul sold a facility on behalf of the not-for-profit operator, Trinity Health. Senior Living Investment Brokerage and Trinity have had a productive relationship, with SLIB handling six of their transactions going back to 2001. The most recent sale featured a 126-bed skilled nursing facility in Grand Haven, Michigan. Built in 1969, with an addition in 1970, the facility was 80% occupied, with a 73% Medicaid, 8% Medicare and 19% private pay/insurance/hospice census.
Trinity specializes in hospitals, and their core SNFs are located adjacent to them. With that, there was a facility in the same market that was closer to their hospital, leading to the sale. Madison Healthcare and its subsidiary, Prestige Healthcare Management, paid $6.7 million, or $53,200 per bed, for the facility, with an 8.85% cap rate. They expect the quality mix to immediately increase, as Trinity had previously directed most Medicare and private pay patients to their other facility. Also, they plan to improve the operating margin (5.6% on nearly $10.5 million of revenues) and increase census. Now, the hard work begins.
