The Battle For Brookdale
Shareholders are taking it up a notch to raise the value of Brookdale Senior Living. In World War II we had the Battle of the Bulge, and in seniors housing, we now have the Battle for Brookdale. Sandell Management, which owns about 2 million Brookdale shares, has nominated three directors, including Tommy Sandell himself, to help the company maximize shareholder value, claiming current directors have little real estate expertise, and in one case seem in imply that one current director, who they want to replace, is too old by stating his age (77). Tell that to Jim Moore. Now, Glenview Capital Management, which has upped its ownership from 8.75 million shares three months ago to 11.59... Read More »Northeast priciest to build AND buy SNFs
Not surprisingly, building or buying skilled nursing facilities in the Northeast, where land costs, average income and barriers to entry are high, is the most expensive of the other regions, with an average price per bed in 2014 of $88,200 per bed (according to the 2015 Senior Care Acquisition Report, coming out later this month) and an average development cost of approximately $185,000 per bed in construction projects announced since early 2013 featuring a majority of skilled nursing beds. Those sales of Northeast SNFs featured mostly old facilities, with an average age of about 36 years, which is indicative of the aging product in that region. Read More »Mezzanine financing helps fund new construction
Contemporary Healthcare Capital is helping to finance Medical Development Corp.’s (MDC) new Canterfield brand of assisted living/memory care communities in the Southeast. Currently there are two Canterfield communities open, one in Oak Ridge, Tennessee and one in Forsyth County, Georgia. But there are six more coming, including one in Kennesaw, Georgia. For that project, which should cost around $17 million, or approximately $182,800 per unit to build, Contemporary is providing a $3.1 million four-year mezzanine loan with a rate in the mid-teens, while State Bank and Trust (a local bank with locations across Georgia) is providing a $12.45 million loan with a rate of LIBOR plus 300 basis... Read More »High cost memory care development in Florida
It’s not often you see a new senior living development cost over $400,000 per unit to build. Nevertheless, Cypress Cove Health Park Florida, a not-for-profit CCRC built in 1999 with currently more than 550 residents on 48 acres in Fort Myers, Florida, is adding 44 memory care units for a cost of approximately $18.5 million, or about $420,500 per unit (in a state that averages $213,000 per unit to build new assisted living/memory care or standalone memory care communities, according to our data). The new two-story building, scheduled to open in 2016, will feature four households each with 11 private apartments that each average about 250 square feet. There will be a significant amount of... Read More »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 »Schedule a demo
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