Whoa, was it a week for Senior Living Investment Brokerage or what? Our inbox was peppered with closings from several SLIB teams, and the deluge doesn’t appear to be over, with a few more closings expected next week. And to think they would rest on their laurels after a strong second-place finish in terms of deals closed in 2020, according to our just-released Broker Rankings in February’s issue of The SeniorCare Investor.
Jason Punzel, Brad Goodsell and Vince Viverito kicked off the week with an independent living community sale in Medford, Oregon, which we profiled here. But Nick Cacciabando and Jeff Binder soon announced their own sale of a 213-unit CCRC in Newton, Kansas. Built in stages in 1963, 2007, 2012 and 2014, the community currently has 76 independent living units (with patio home, duplex, single cottage, four-plex and six-plex options), 36 assisted living/memory care units and 101 skilled nursing beds, including 58 beds located in six “green house” buildings.
Prior to the pandemic, it was operating a little above breakeven on nearly $10.29 million of revenues. We’re sure some of the higher expenses were due to previous ownership being a not-for-profit, which is a faith-based organization looking to exit the industry. The property was marketed in late fall 2019 and went under letter of intent in March 2020. The buyer (New York-based Mordy Lahasky) was then able to assume the existing USDA debt once it was written down to an acceptable level. A COVID-19 outbreak at the SNF caused a delay, but ownership fortunately was able to get it under control with limited impact to census. Mr. Lahasky will bring in a strong regional operator to manage the community going forward. The final purchase price came to $10 million, or $49,300 per unit.
Speaking of delays, Dave Balow faced a long road to eventually close the sale of a 26-bed/18-unit assisted living community in Sharon Springs, New York. Built in 1960, the community took advantage of the state’s Assisted Living Program, which allows for the care of skilled nursing patients in a less medically intensive, lower-cost setting. Mr. Balow has closed a few of these ALP transactions and was used to the longer CHOW process in the state of New York. The community was initially marketed in the fall of 2018 and went under contract at a price of $2.9 million, with the private partnership owner holding out on selling the real estate until the state approved the CHOW.
However, during the process, census and cash flow dropped to the point that the buyer (a growing ALP owner/operator with multiple locations in upstate New York) could not secure financing at the agreed upon price. By the end of 2019, census stood at 67%, with a 15% operating margin on $960,000 of revenues. Typically, ALP communities can operate at a 30% margin, or higher. COVID-19 also delayed any hope of a quick census rebound. So, the price was renegotiated to $1.9 million, or $105,600 per unit, at a 7.5% cap rate based on 2019 figures. Congrats to Mr. Balow on getting the deal across the finish line.
Finally, Matthew Alley and Ryan Saul teamed up to sell three assisted living/memory care communities in El Paso, Texas. Totaling 167 units, the portfolio reported occupancy in the high-80% range and an operating margin of 10% on about $7.75 million of combined revenues. That performance did dip in 2020 due to COVID-19 outbreaks early in the pandemic. However, census has since stabilized.
The seller, which was looking to divest from a non-core market, closed one of the communities, which will be reopened and leased to a governmental agency for an alternative use. The buyer, a local owner/operator, utilized a local lender to fund the purchase price, which was not disclosed. SLIB managed to close the transaction about four and a half months after letter of intent.
