Sometimes a brand-new physical plant and high-quality operator isn’t enough to keep a senior care facility from hitting financial difficulties. That was the case of a two-year old transitional care facility in Tucson, Arizona that just sold to a Chicago-based owner/operator in a transaction led by Amy Sitzman, Jacob Gehl and Humair Sabir of Blueprint Healthcare Real Estate Advisors.
Developed at an approximate cost of $24 million, or $270,000 per bed, the 103-bed facility was not open for very long before it was placed into SEC receivership under the supervision of Thomas Seaman and Associates. Why? The group (unrelated to the operator) who raised the EB-5 equity for the project had misappropriated funds for both this and numerous other assets. Additionally within 12 months of the property opening its doors two other developers (Mainstreet and Veritas) began developing short term rehab centers. Both new buildings are within close proximity to and directly compete with this facility which compounded the challenges already in place by the receivership.
The operator, Santé, and the receiver did what they could to keep the business afloat,contributing additional funds and pulling from reserves to just keep the HUD loan current and employees paid. Ultimately the receiver decided to seek a sale, engaging Blueprint to lead the process. The Chicago-based buyer previously had success with another Tucson turnaround investment in the past year and emerged as the best fit. The deal closed upon assumption of the HUD debt, which totaled about $17.18 million. That debt, plus a purchase price of $1.368 million, according to receiver documents, brings to total investment to approximately $18.55 million, or $180,100 per bed.
