Stand-alone memory care communities were much maligned several years ago, partly because too many of them were built, and partly just because you said you were a memory care operator didn’t mean that you knew what you were doing (we can just see Loren Shook nodding in agreement).
Exactly two years ago, at the initial height of the pandemic, a group of investors bought a small memory care community in Clinton, Connecticut with the goal of holding it for a short period of time, investing capex and stabilizing it through the pandemic. It looks like they succeeded.
Dave Balow of Senior Living Investment Brokerage just sold this 48-unit community for $7.1 million, or about $148,000 per unit and $284.00 per square foot. It was originally built in 2002, with renovations in 2008 and the most recent capex completed in the first quarter of 2021. Annualized revenues were $7.1 million through March 2022, with EBITDA growing as census was growing, but only about $250,000 with a 79% occupancy rate. Our estimate is that when census hits 90% (just five more residents), EBITDA will reach $550,000 for a projected cap rate of about 7.7%.
The buyer is based in New York and plans to use a bridge-to-HUD loan when cash flow stabilizes. The property sits on 2.6 acres and has about 25,000 square feet.
