Strawberry Fields REIT continues to grow its skilled nursing holdings, and did so in a big way this month, by acquiring a large 231-bed SNF in Des Plaines, Illinois. That facility has had a somewhat checkered past. Originally built in 1975, it was acquired by a Catholic not-for-profit hospital and skilled nursing provider in May 2011 for $22 million, or $115,200 per operating bed, at a 9.5% cap rate.
At the time, the facility was operating at an 11% margin and with just 191 of the 231 licensed beds (about 113 of which were occupied at the time), for an effective occupancy rate of 59%. Its location close to Chicago, quality mix above 50% and specialty care services like ventilator, dialysis and tracheotomy care played a big part in pushing the price above $100,000 per bed, a level rarely seen back then.
In the three years after that acquisition, operations dropped off significantly and it was losing more than $300,000 per month. Occupancy also remained low at 65%, and the quality mix fell below 50% of the census. It was also still operating below its licensed capacity at just 181 beds. The not-for-profit decided to sell in December 2014 to Health and Home Management Inc. for $17 million, or $93,900 per operating bed. Ryan Saul of Senior Living Investment Brokerage had handled both the 2011 and 2014 transactions.
And yet, the facility’s performance fell even further, with occupancy dropping to just 31% by the end of 2017. That’s when The Landmark Group took over operations. Fast forward to today, and occupancy has risen to about 60%, and the SNF has a new owner in Strawberry Fields, which paid $15 million, or $65,000 per licensed bed. The REIT will keep Landmark in as the operator under an existing 10-year lease.