How HCP Will Deal With Its Largest Tenant
HCP plans to sell up to 50 HCR ManorCare SNFs, but will it really work? The REIT HCP announced in February that it will try to sell up to 50 of its HCR ManorCare skilled nursing facilities to try to improve on the property level lease coverage ratio that is below 1.0x. The way it is going to work is that HCP will credit the annual lease payments in an amount equal to 7.75% of the sales proceeds. Using an example of a current 0.80x lease coverage on a facility to be sold, if it sold at a market cap rate of 12% to 12.5%, there would be no improvement in lease coverage. In fact, the coverage would decline slightly, so HCP would really not be any better off. One equity analyst did the math and... Read More »Looking for Yield in Health Care REITs
Even with the threat of rising interest rates, there are long-term benefits to investing in health care REITs. Last week, there was some noise from the Federal Reserve that they may start increasing interest rates a little sooner than most people expected. Well, that sent most health care REIT stocks tumbling, many by 4% to 5% that day. Yes, REITs have been riding high for a while, but where else can you find dependable yields in the 4.5% to 7.0% range? Is now a good time to invest in health care REITs? For a short-term investor, I would say no, because the interest rate risk is reasonably high for the remainder of the year. For long-term investors? The yield on your cost basis is only... Read More »Big players entering the stage
The seniors housing development market is increasingly drawing attention from investors outside the senior living world. Some of you may have seen multifamily investor Drever Capital Management, with a portfolio of 170,000 apartments for middle income families, entering the seniors housing business with a plan to spend upwards of $500 million over the next 10 years in acquiring and developing senior housing properties, including independent living, assisted living and memory care projects. This isn’t the first foray into seniors housing world for Drever, which in 2012 purchased a 4-year old independent living community with 124 units in Lexington, South Carolina when the community was 50%... Read More »Build or buy?
In our 2015 Senior Care Acquisition Report, which will come out later this month, we dissect over 70 statistics in the senior housing and skilled nursing M&A market. Here is a sneak peak at one of them. It was no surprise that the Northeast region topped the charts in terms of the average price paid per unit in seniors housing (independent and assisted living), at $281,700 per unit. But, all regions, including the perennial lowest cost North Central region with $147,000 per unit, significantly increased in value on a price per unit basis from 2013 to 2014. However, on the development side (looking at seniors housing developments since early 2013), the most expensive region to build was... Read More »Integral Senior Living growing
Carlsbad, California-based Integral Senior Living is making a big move outside of its home state. Strictly a third-party manager, ISL was founded in 2000 by Sue Farrow (formerly of Aegis Living, Sunrise Assisted Living and Transamerica Senior Living) and is now one of the largest providers of senior care in California. But in addition to adding five more California communities to its management portfolio in the coming year, ISL is making a big push across the country. ISL already has a presence in 10 other states outside of California, but will manage new communities in Texas (3), Missouri (2), Colorado (2), Utah (1), Nevada (1), Tennessee (1) and Georgia (1). The properties, which will be... Read More »Seniors Housing Bubble or Not?
Webinar attendees voted by nearly 3 to 1 that we are approaching a valuation bubble. More than 125 people joined us live last week for our webinar on the Seniors Housing Market: Bubble or No Bubble. Acquisition values across the spectrum all hit new records in 2014, and as you can guess, cap rates across the spectrum all declined, but not to record lows….yet. If we are approaching a bubble, most of the panelists believed that trouble would not begin until 2016 at the earliest and 2018 at the latest. And they also believed that it was more likely that an outside event would be the cause of a market decline, such as a big jump in interest rates or some economic calamity, rather than an... Read More »Genesis Healthcare Makes First Earnings Report
News of higher operating costs sends the shares of newly merged Genesis Healthcare and Skilled Healthcare down more than 20%. Welcome back to the world of public investors. I say this to George Hager and his team at Genesis Healthcare, which closed on the reverse merger with Skilled Healthcare on February 2. Just three weeks later, they reported fourth quarter operating results for both companies, and while the skilled patient day mix at Genesis increased by 60 basis points and occupancy increased 30 basis points from the year ago quarter, Skilled Healthcare’s occupancy declined 110 basis points from the fourth quarter in 2013, to just 81.1%. Sounds a little too similar to the... Read More »Balfour opens in downtown Denver
A 275,000-square foot, 205-unit senior living community with five stories of independent living and three stories of assisted living and memory care opened this month in Denver, Colorado, coming with a $78 million, or $380,500 per unit, price tag. The Balfour at Riverfront Park’s urban setting, located in downtown Denver, makes it unique in the senior living world, being walking distance to theaters, restaurants and shops. The building features 112 IL units (which opened in October 2014 and are half-filled so far), 65 AL units and 28 MC units, which are on a separate secure floor. Michael Schonbrun, the developer and owner, opened his first Balfour Retirement Community in Louisville,... Read More »Big investment from Capitol Seniors Housing
Capitol Seniors Housing (CSH), a real estate investor/developer specializing in seniors housing, recently announced that it had invested over $90 million in four senior living developments, all set to open in 2015. For roughly $34 million, or $312,000 per unit, CSH plans to open a 109-unit assisted living/memory care community (which includes a 39-unit freestanding memory care community) this month in Torrance, California, to be managed by Integral Senior Living. In May, a 79-unit AL/MC community (with 54 AL units and 25 MC units) is expected to open for a total cost of approximately $23 million, or $291,000 per unit. The building is located in Marlboro, New Jersey, which is about 30 miles... Read More »Brookdale and Monetizing Real Estate Value
Pressure is mounting on Brookdale Senior Living to monetize the value of its owned real estate, but at what cost? The pressure is increasing on Brookdale Senior Living “to do something” to monetize the hidden value in its owned real estate. This has all come up as a result of a weak fourth quarter from the recent Emeritus purchase. We have a big problem with all this. Yes, management always has to look to increase shareholder value. But everything that is being talked about is a short-term fix taking advantage of the current capital markets environment. As you know, we never liked the Emeritus acquisition for Brookdale. But now, by selling off the owned real estate of the combined company,... Read More »Schedule a demo
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