Birchwood Healthcare Partners is making a successful exit from their skilled nursing/assisted living facility in Huntington, West Virginia, more than doubling the facility’s value after just three years of ownership.
When Birchwood originally purchased the 55-bed/unit facility from an individual owner in 2015 for $3.2 million, the facility was losing money. Originally built in 1928, the facility was totally renovated in 2009 making it one of the more modern facilities in the area. It also featured an assisted living component. Although it was 90% occupied, its operator tenant stopped paying rent and filed for bankruptcy, prompting the owner to sell.
So, Birchwood brought in Providence Health Group to operate and planned to implement Medicare at the facility to take advantage of the high reimbursement rates in the area. It must have worked, for in the subsequent three years, Providence improved the operating margin to over 17% on about $5.8 million of revenues.
Birchwood decided to sell the facility for approximately $7.16 million, or $130,200 per bed, with a 14.2% cap rate. That’s a 124% premium on the previous price. Part of the deal was that the buyer, CareTrust REIT, wanted to keep Providence in place as the operator. Why mess with success?
They leased the facility back to them, helping Providence recapitalize the facility and acquire the portion of the operation that it did not previously own. The new master lease carries an annual cash rent of about $676,000. CareTrust funded the deal with cash on hand and $5 million in borrowings from its revolving credit facility. West Virginia University alumnus Steve Thomes, Ben Firestone and Michael Segal of Blueprint Healthcare Real Estate Advisors handled the transaction.
