The closings keep on coming from Evans Senior Investments, with the firm announcing two seniors housing deals in the last week. Those make the sixth and seventh properties sold by Evans since the pandemic started.
The first deal was a small one, but certainly wasn’t straightforward. Evans represented the court-appointed receiver of a six-unit independent living community that sits on a larger 171-bed senior care campus with mostly skilled nursing beds, and assisted living units too. Built in phases from 1963 to 2006, the campus had been owned and operated by a second-generation family member for over 30 years, until they decided to sell in 2016 in order to focus on their existing assisted living operations in Ohio. The campus was left in good shape to a Brooklyn, New York-based senior care owner, Homes of Eden, but things eventually started to go south.
In early 2019, CIBC, which provided Homes of Eden with a $16 million acquisition loan, sued them for defaulting on the loan with more than $14.96 million of principle and interest remaining on their balance. That wasn’t all, with other complaints filed by the Ohio Department of Health and the Sandusky County Treasurer’s office claiming that the SNF had over $200,000 in back property taxes and was thousands of dollars behind on all of its utility and pharmacy bills. Even the water bill wasn’t being paid, with multiple shutoff notices delivered to the facility. The previous owner had also sued Homes of Eden back in 2017 for a supposed breach of contract after they allegedly failed to pay a fee of 5% of the facility’s revenue that was part of a transition agreement.
Amid all of this, the six IL villas were operating well with 100% occupancy and an EBITDAR margin of 77%. Villa Healthcare, based in Chicago, was brought in to take over operations at the campus, which could be significantly improved. Representing Michael Flanagan, the court-appointed receiver, Evans Senior Investments actually sold this portion of the campus back to the original owner for $943,000, or $157,000 per unit. The rest of the campus will hopefully sell in the next couple of months, with Evans again leading the process, but the search for a new buying group is still on. Bids are due by May 24th.
Evans Senior Investments also handled the sale of a 73-unit assisted living/memory care community near Paducah, Kentucky, for $12.125 million, or $166,000 per unit. Built in 1997, with expansions in 2008 and 2017, the community was licensed for a lower acuity designation of assisted living, rather than for personal care. However, the seller, an independent owner, did have a CON for personal care for the building, thereby giving the new owner the option to care for a higher acuity resident.
This was the only assisted living community within 15 miles, and it showed well with strong operations. Occupancy was 93%, while the community operated at a 39% margin. A regional owner/operator paid an 8.5% cap rate after replacement reserves, but closer to 9% without them. The new owner plans to invest in upgrades to the physical plant and amenities.
