Changes at HCP, Brookdale, Genesis
Earnings season brings more than just earnings to the surface for some companies. What can I say? It has been quite a week, and we are only at Wednesday. On Monday subscribers received my initial take on HCP’s announcement about spinning out its HCR ManorCare portfolio into a new REIT. Maybe management thought it was necessary, but I really think we are going to be hearing some negative news in the future, and if so, it will make HCP’s decision look better. Just look at the performance of Genesis Health in the first quarter, which sent its share price plummeting by 20% yesterday. One problem is that with the HCR portfolio representing more than 25% of HCP’s revenues, with it gone,... Read More »
Closing by Clousing
With the help of Brad Clousing of Senior Living Investment Brokerage, Sabal Financial sold its 41-unit assisted living community in Cumming, Georgia. Previously, Sabal had purchased the note on the non-performing property in a large portfolio sale from Synovus Bank, but has subsequently foreclosed on the asset. The community was built in 1997 and managed by Oaks Senior Living, which is owned by the Salabarria family. Under Oaks management, the community actually was performing well, with a 23% operating margin and 80% occupancy, despite the ownership change and bankruptcy. The purchase price came to $3.3 million, or $80,488 per unit, with an 8% cap rate. The buyer, a Midwest-based regional... Read More »
Arbor Acquisition
Aron Will is at it again. Through a national bank, Mr. Will of CBRE secured a $38.9 million five-year bridge loan, with three years of interest only and a sub-200 basis point spread over 30-day LIBOR, for an institutional client. The financing went towards funding the acquisition of The Arbor Terrace Portfolio, which includes two 101-unit assisted living/memory care communities (each with 71 AL and 30 MC units) in the Atlanta, Georgia market. Both communities opened in the fourth quarter of 2015 and are leasing well. The Arbor Company manages the portfolio. Read More »
The weight of the cap rate
In the last couple of years, we have started looking at cap rates based on the size of properties and portfolios acquired. In weighting cap rates by size, we avoid the issue of the cap rate for a 180-bed facility sale being weighted the same as the cap rate for a 60-bed facility sale. Some people believe that a weighted average cap rate is more reflective of a true cap rate average because the dollar value of the portfolios and larger facilities sold can dominate the overall market. But in the last 15 years (as long as we have been tracking it), there has largely been no significant difference between the weighted and un-weighted average cap rate, just that in peak value years, the... Read More »Bankruptcy breeds opportunity
After an exceptionally busy month for Texas M&A (details included in the upcoming issue of The SeniorCare Investor), we have one more. Highland Capital Management’s Cornerstone Healthcare Group was the stalking horse and ultimate buyer of a bankrupt not-for-profit senior care company with two senior living communities in Texas and one in Tennessee. The target, UGHS Senior Living, was actually profitable but filed for Chapter 11 bankruptcy protection in November 2015 after its not-for-profit parent University General Health System filed for bankruptcy protection in February 2015 and its creditors were seeking repayment through various UGHS subsidiaries, including UGHS Senior Living. The... Read More »Breaking barriers
If skilled nursing facilities sold on average at an all-time record high price of $85,900 per bed, then how did the average 2015 cap rate hold up to history? Well, according to the 21st Edition of The Senior Care Acquisition Report, the average cap rate for skilled nursing transactions dropped 20 basis points to 12.2%, which is the second lowest average ever (12.1% was the lowest ever at the last market peak in 2007). Traditionally, the average skilled nursing cap rate has reliably ranged between 12.0% and 13.5% for most of the past 20 years, regardless of swings in interest rates and changes in financial markets. But with two consecutive years of sub-12.5% average cap rates (2014 was... Read More »Partner in post-acute
To finance its recent acquisition of Spectrum Professional Services, an investor group led by healthcare M&A investor Beecken Petty O’Keefe and Company recently received a $110.5 million senior secured credit facility arranged by Capital One Healthcare, which served as administrative agent and lead book-runner. Spectrum is a rehabilitative therapy management consulting business catering its services to post-acute care, skilled nursing and assisted/independent living providers. It was acquired in December 2015 by a joint venture headed by Beecken Petty O’Keefe and including Sunrise Senior Living plus existing investors at Spectrum. Cain Brothers had served as Spectrum’s exclusive... Read More »
Skilled Nursing Facilities Are Not Prisons
Apparently, The New York Times thinks people are “held” in nursing facilities, at least in South Dakota. I don’t know if any of you caught yesterday’s front-page headline in The New York Times, but it really got me mad. The headline was, “Thousands Are Held Wrongly In Nursing Homes.” Held? Are they talking about prisons? I know no one wants to be there, but they are not “held.” The article was about South Dakota, where apparently people who should not be in a skilled nursing setting are there because there are no other options. At least none that will be paid for by someone else. One resident told investigators that when friends came to take him out for a ride, they had to sign... Read More »
April deal drought
The end of April saw a dearth of deals, until this transaction was announced (no price was revealed, but we’ll take it). Looking to expand its presence in the Iowa market, a Northeast-based owner/operator purchased two skilled nursing facilities in the state for $7.2 million, or $37,895 per bed, with an expected first-year cap rate of 13%. The 90-bed facility in the town of Washington was built in the 1970s, but had some renovations 15 to 20 years ago. The Muscatine facility has 100 beds and was also built in the 1970s, with renovations in the late 1990s and early 2000s. Occupancy was 80%, and both facilities had experienced regulatory issues. Despite that, the facilities operated at a... Read More »Big Sky gets big refi
In one of the company’s largest transactions closed in recent years, Denver-based Pineview Capital Group secured a $12.35 million HUD loan to refinance a 153-unit senior living community in Butte, Montana. The community was built in 1999 on a 13-acre property, with 102 assisted living units, 31 independent living units and 20 memory care units. There is also a 19% Medicaid census. Brett Patrick and Brian Therkildsen led the way for Pineview on this transaction. Read More »Schedule a demo
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