About 35 years ago, an Ivy League educated pioneer decided to buy a senior living community. His friends and family thought he was nuts. In 1985, after all, it wasn’t exactly the industry where aspiring entrepreneurs went to seek their fame and fortune. So, one Shelly Smith and a financial partner bought a relatively new retirement community that only had independent living at the time, as “assisted living” was not yet in the industry vernacular.
Located in Salem, Oregon, Smith started expanding the campus in the early 1990s and built one of the first assisted living communities in Oregon. After that, he added IL cottages in 1997, more assisted living units in 1997, and picked up some adjoining townhouses for independent living in the next several years. Before long, he had grown the campus to 190 units, with a 95% private pay census and a small Medicaid census, in addition to some low-income private pay. Today, it has 94 independent living apartment units, 16 cottages, six duplexes and 74 assisted living units for a total of 190 units.
Known as Lancaster Village, this community developed quite the local reputation for care, service and the dining experience. It may not have had all the bells and whistles that some of the newer communities have, but it had something else that most providers only dream of. That is staff that stayed with them for years. The top two managers have been with the community for about 25 years, and the average tenure of all supervisory staff is about 15 years. You just don’t find that kind of longevity anymore, in or out of seniors housing.
Obviously, Smith was doing something right to keep key employees that long. And it showed in his census. Lancaster Village’s census usually ranged from 97% to 99% in the past two years, and while occupancy may dip “down” to 95% from time to time, it is usually closer to 98%. During the pandemic, the community did lose a few points of occupancy, but nothing to worry about. To really get you jealous, throughout this entire coronavirus pandemic, Lancaster Village has not had one positive case. We have to chalk it up to management and the staff.
So, being a septuagenarian, Smith decided it was time to sell (but not retire) and after signing a letter of intent last summer, he went under contract last December with a projected March closing. Uh-oh. It was not easy even in the best of times, but when it was the worst of times last spring, there were times when the contract could have been terminated. It wasn’t. And best of all for the seller, and the market as a whole, there was no re-trade of the price. It held firm at $31.5 million, or just under $166,000 per unit. The cap rate was about 7.6%. Kudos to the lender, Peter Delmage of BBVA Compass, who held firm with their mortgage commitment, given just before the pandemic started to spread, at a time when some lenders hit the pause button on their deals.
The buyer was The Springs Living, and the CEO was well known by the seller, going back about 30 years when Smith mentored him in the seniors housing business. The staff plans on staying in place, and we don’t believe the buyer will want to change too many things. Dan Mahoney and Blake Bozett of Blueprint Health Care Real Estate Advisors represented the seller and also get credit for holding the transaction together as the pandemic spread. And for his second act, Shelly Smith plans to be available for any consulting assignments, for those who want to learn the secret sauce of maintaining high occupancy throughout a pandemic, and how to keep your staff in place for a few decades.
