Matthew Alley of Senior Living Investment Brokerage closed a couple of his transactions right in his wheelhouse in central Texas. That makes 107 seniors housing and long-term care assets sold in the Lone Star State for Mr. Alley.
First, he sold a 174-bed skilled nursing facility in San Marcos (30 miles south of downtown Austin), working on behalf of the previous not-for-profit owner.
The SNF market in Texas seems to have become more attractive to buyers, with the QIPP program entering its third year, two bills in the state legislature that if passed would increase the per-Medicaid resident pay out, PDPM going into effect later this year, and CMS’ proposed 2.5% national increase to the Medicare market basket rate for skilled nursing facilities, which would add some $887 million to SNF reimbursement in fiscal 2020. All of these factors appear to have made the Texas SNF market, long a tough one to operate in, a little more appealing.
The San Marcos facility was built in 2008, but despite its relatively new age, multiple regulatory issues led to a downturn in occupancy to just 52% and high employee turnover. Cash flow was also impacted, as the facility was barely breaking even. However, the not-for-profit seller hired an experienced director at the beginning of 2018 who began to turn around the operations and boosted the facility’s CMS star rating.
It appears the worst is now over, which is good news for the buyer, a regional operating group with other facilities in Texas. They plan to enter the facility in the QIPP program, in addition to making other improvements. They paid $7.6 million, or $43,700 per bed, for the facility. For such a new building, if operations get under control, that per-bed value should improve greatly.
Then, north of Austin in the town of Pflugerville, Mr. Alley sold a 40-unit assisted living community for $2.55 million, or $63,750 per unit. Built in 1994 and operating with 48 beds, the community is highly visible in its surrounding neighborhood, and is adjacent to Pflugerville Health Care Center, a 111-bed SNF operated by Chosen Healthcare. Occupancy was just 68%, though, and the community was making just about $175,000 in EBITDAR on $1.47 million of revenues. So, some operational improvements could be made. The local partnership owner was looking to exit the seniors housing sector and sold the property to a Fort Worth-based regional owner/operator.
