In one fell swoop, Trustwell Living more than quadrupled its portfolio of managed seniors housing communities by assuming the operations of 16 communities across Ohio (11 communities), Illinois (3), and Florida (2). Prior to the move, the company, which was founded by former Capital Senior Living CEO Larry Cohen, operated five communities in Kansas (2), Illinois, Missouri and Tennessee. The 16 added communities total 762 units of assisted living and memory care, averaging 48 units at each property. The largest community is 113 units. While predominantly assisted living, there are also some memory care and independent living units.
Judging by the communities’ small average size and locations, we assume these were formerly operated by Enlivant and were part of the default with Fannie Mae announced earlier in the second quarter. Average occupancy is in the mid-70% area, with the expectation that it will get to the mid-80% area within a year. That would be about four to five net new residents per community, which would certainly seem to be doable. Also, we understand that RevPOR is better than we would expect, so that will help with margin improvement with the new management.
Although the terms of the management contract were not disclosed, we have to assume there were sufficient incentives to motivate Trustwell to perform well. In addition, since if we are correct in our guess that Fannie Mae is the owner, we would also assume they would like to get these assets off their books, so there should be a decent buyout in place as part of the management contract.
The deal turns Trustwell into a sizeable regional operator in the Midwest, and it is primed for additional growth once the 16 properties are fully transitioned and integrated. With experience in assuming the operations of troubled assets, the company should see no shortage in those types of acquisitions in the near future. But Trustwell has not only brought on distressed properties. Its most recent acquisition in West Knoxville, Tennessee, saw Trustwell and Passco Companies buy a 145-unit independent living community that was 98% occupied for $49.5 million, or $341,400 per unit.
