Evans Senior Investments kicked off June with the sale of a seniors housing/skilled nursing portfolio in Michigan. With Welltower’s major sale also coming to light at the start of the month, hopefully that’s a sign of a more fruitful summer for the industry as a whole.
The portfolio consisted of two seniors housing/skilled nursing campuses and one stand-alone skilled nursing facility, with a total of 88 assisted living units, 36 memory care units and 270 skilled nursing beds. Built in 1997, 2007 and 2008, the senior living portion of the portfolio was 100% private pay, while the skilled nursing census boasted a high mix of Medicare patients. The transaction represented the second closing tranche of this portfolio that was financed through a HUD loan assumption.
At the time of marketing, the entire portfolio (including the first tranche) generated $48.1 million in revenue and was 78% occupied (with one of the properties still in lease-up from a recent expansion). That low census was also the result of the lack of a Medicaid license at four of the properties. On average, the net operating income margin was 13.3% across the properties.
While negotiating the purchase and sale agreement, the portfolio did see a deterioration in operating performance from $6.4 million of EBTIDAR at the time of marketing to $5.5 million. The total purchase price for all five communities was $68.0 million, or $105,000 per bed/unit, representing an 8.0% cap rate on in-place cash flow. For the three properties in the second tranche, the purchase price came to $38.5 million, or $98,000 per bed/unit. Representing the independent owner/operator, Evans Senior Investments found a buyer in a Midwest-based owner/operator making its first acquisition in the state of Michigan.
