As September turned to October, Senior Living Investment Brokerage announced an impressive run of transactions. First, Jason Punzel, Brad Goodsell and Vince Viverito sold two memory care communities in California for $17 million, or $347,000 per unit, with a 9.5% cap rate. With that high price, you might assume the facilities had just opened or were fully occupied, or both. Instead, the communities were built in the mid-1980s (one was renovated in 2001) and were occupied in the mid-80s.
They were small too, totaling just 49 units across the two locations (in Menlo Park and Sunnyvale). The operating margin was a solid 32% on nearly $5 million of revenues, and rents were high (close to $9,000 per month at the top end of the range). Their local family owner decided to exit the industry, selling to a local operator/developer looking to make its first-ever acquisition.
Another SLIB trio closed a transaction in Maryland. Toby Siefert, Matthew Alley and Nicholas Cacciabando successfully sold a struggling skilled nursing facility in Prince Frederick. Originally built 50 years ago, the 149-bed facility underwent expansions in 1978, 1983 and 1992. Although occupancy increased from the low 70% range to 80% in 2017, it was losing over $1.6 million in annual EBITDA on nearly $12 million of revenues. The not-for-profit owner, which owns seven CCRCs across the country but no other SNFs, decided to focus on the CCRC market, prompting the sale.
A growing investor-operator partnership, based in New York and with a strong presence in the Mid-Atlantic, emerged as the buyer. The purchase price of $11.664 million, or $78,300 per bed, includes $1 million that was held back at closing, which the seller will receive upon a permanent refinance through HUD in the future. There was also a ground lease with the neighboring hospital that had to be renegotiated to a higher lease rate during the due diligence period. No problem for the SLIB team, which closed the transaction at the start of October.
Bradley Clousing and Ryan Saul then teamed up to facilitate the sale of a 42-unit assisted living community in Lancaster, Ohio, for $3.72 million, or $88,600 per unit, with a 10% cap rate. The community was last acquired in 2017 as part of a larger portfolio deal by a private equity group from a national company. But being the only Ohio property in the portfolio, it was divested. Fully occupied, the 20-year old community could improve its operating margin (21% on nearly $1.78 million of revenues), but that will be the job of its new owner, an Ohio-based regional company with 25 other communities in the state. To improve the operating margin, they plan to control expenses, increase rents (it is fully occupied, after all) and utilize Ohio’s Assisted Living Medicaid Waiver program.
Finally, Mr. Clousing went solo to sell a brand-new assisted living community in Warner Robbins, Georgia (Macon MSA). It was developed in 2017 by a hospitality/multifamily owner that was making its first assisted living investment. Construction and licensing delays affected the lease-up period (the community was only 28% occupied), and the owner elected to sell the asset to an Ohio-based equity provider.
Months before closing, the buyer’s operating partner, Phoenix Senior Living, immediately took over operations and rapidly brought the community to near-stabilization. Sales of seniors housing communities (which includes independent and assisted living) under five years old averaged over $308,000 per unit in 2017, according to the 23rd Edition of The Senior Care Acquisition Report. So, paying $8.5 million, or $166,700 per unit, the buyer should be able to realize a significant return on the property as it stabilizes. Kudos to Phoenix Senior Living for the quick turnaround.
