So, how do you sell an underperforming, over-leveraged community that is in receivership and was originally built in 1965. That is a tough one, but it did help that Priority Life Care was the court-appointed receiver and manager effective about the end of 2020.
This is what Blueprint Healthcare Real Estate was dealing with when it was hired to sell a 164-unit community in Pennsauken, New Jersey called Ivystone Senior Living. Apparently, the owners refinanced existing HUD debt in the year before the pandemic hit, taking out some excess cash. What was not known (or forgotten) was that in order to participate in a relatively lucrative Medicaid program for the “independent living” units, the financing had to be agency financing and not from a bank, which did the refi. The state threatened to pull the plug on that contract, which would have been financially devastating, not to mention the need to find a new place to live for these residents during the COVID pandemic. Priority Life Care made that argument to the state, which relented.
The community has 164 units, of which 100 are technically independent living but with the state Medicaid contract acting more like adult home beds. There were also 43 assisted living units and 21 memory care units. In total, the license was for 236 beds. Occupancy was about 75% based on units, or 53% based on beds, but we heard that there were not many shared units. Priority Life Care worked hard to stabilize and increase the occupancy, stabilize expenses and make sure the Medicaid program was not shut off.
One thing that the new owners, New York-based UNPPG Management LLC, will have to do is invest in some upgrades to the building, which is old with deferred maintenance even though there were some additions over the years. One thing going for them is a low-cost basis, and even though the price was not disclosed, we believe it was below $50,000 per unit, so there should be plenty of wiggle room. Still, not an easy task. And not an easy task for Jacob Gehl, Humair Sabir and Michael Segal of Blueprint to bring the sale across the finish line.
