Diversicare Healthcare Services purchased a large, independent, not-for-profit CCRC in Homewood, Alabama (east of Birmingham) in a deal handled by Nick Glaisner and Jake Sexton of Ziegler. Called St. Martins of the Pines (SMP), the community had been in significant financial distress, losing nearly $2 million in EBITDA on approximately $13.5 million in revenues. Occupancy was understandably low, as well, across all acuity types.
Founded in 1955, the campus features a four-story independent living community with 97 units, a two-story assisted living/memory care community with 40 AL and 51 MC units, and a skilled nursing campus in a greenhouse “cottages” style (which replaced an older SNF on campus that was currently not in use) with 128 skilled nursing and short-term rehabilitation beds. SMP is the second largest skilled nursing campus in Alabama. It is located on the outskirts of Mountain Brook and Homewood, near the University of Alabama at Birmingham (UAB) and centrally located within the UAB hospital system.
After Ziegler was engaged by the SMP Board to evaluate its financial options, including a potential sale, the team brought in Michael Morton of Ankura to consult with the campus and start stabilizing its operations. Ankura implemented some significant expense controls, and we understand the campus was approaching breakeven by the time of the eventual sale.
There were a couple of parties interested in the acquisition at the start of 2023. As the economic environment and interest rate increases worsened across the country, the CCRC’s lender encouraged a quick sale of the campus. With speed prioritized, we imagine the community, which was still losing money and faced stiff competition from a nearby campus, sold for under the par value of its debt. According to other sources familiar with the deal, the price likely fell below $35,000 per bed/unit, which would be a great deal for Diversicare. It also leaves them plenty of room to turn around operations and add value to the community, which is still no guarantee.
Going forward, Diversicare will look to convert the campus to a rental model, move the SNF residents to the former SNF on campus and repurpose the newer greenhouse “cottages” into assisted living. The company plans to continue the expense control and occupancy improvement measures started by Ankura.
