Portfolio Sales

Pricing Premiums for Portfolios vs. Single Asset Sales

As a company, we value many senior living and skilled nursing facilities both as portfolios and single asset sales.  Often times we get asked the question if there is a premium to sell a portfolio of facilities instead of an individual facility.  In general, the answer is “yes”.  However, it depends on the size of the single asset vs. the size of the portfolio, the location of the portfolio and the make-up of the portfolio. 

In general, portfolios are more attractive to buyers if they are in the same general geographic location, are similar in size and quality and are either mostly seniors housing or mostly skilled nursing.  A portfolio is easier to manage and will fit the acquisition criteria of a buyer better when it is more homogeneous.

When comparing prices of an individual asset vs. similar assets that are in a portfolio of multiple assets we typically see a premium of 5-15% for the portfolio.  A portfolio allows a buyer to deploy more capital at once, achieve greater economies of scale, makes it easier to enter a new geographic location, and often allows for more attractive financing terms. 

Whether you own one community or several, the first step in determining value is to engage an experience professional to assist in the valuation and analysis of your property/properties.  Let us know if you would like a no-obligation market analysis.  

Clousing, Saul and Binder Sell Georgia Assisted Living/Memory Care Community

Brad Clousing, Ryan Saul and Jeff Binder teamed together to sell a 93 unit Assisted Living/Memory Care community in north central Georgia. The community consisted of 74 assisted living units and 19 memory care units on 15 acres. The community consists of 2 buildings, built in 2011 and 2012, an additional 20 unit expansion permitted and graded overlooking a private lake. The property leased up ahead of schedule and was fully stabilized by April of 2013. The Seller is a local developer of which this was their first seniors housing development. The Buyer is a national REIT and the asset will be operated by their affiliated operating company. Senior Living Investment Brokerage was able to procure a sale price of $236,833 per unit at a 7.5% capitalization rate.

Jason Punzel Presents at the Pacific Northwest Investors Conference

On November 14th, Jason Punzel presented at the Pacific Northwest Investors Conference held in Vancouver Washington.  Jason's topic was on valuing Senior Housing and Skilled Nursing Facilities.   The event was hosted by the Oregon Health Care Association and the Washington Health Care Association. The event was attended by owners, investors, lenders, brokers and industry specialists.  Jason can be contacted at punzel@slibinc.com

Jeff Binder Sells Missouri Skilled Nursing Facility

Jeff Binder was able to procure multiple offers on a 120 bed Skilled Nursing Facility that had struggled with census and had negative cash flow. The Seller is a national owner/operator that chose to exit the Missouri market. The Buyer is an Illinois-based owner/operator looking to add to their existing portfolio in the state of Missouri. Due to the confidentiality of this sale, please contact Jeff at binder@slibinc.com or 314/961-0070 for additional information on this transaction or on how he can assist with marketing your community.

Skilled Nursing Cap Rates - why are they higher?

Lately, I have spoken with several Skilled Nursing facility owners about why capitalization rates are so much higher for Skilled Nursing facilities than Assisted Living and Independent Living facilities, not to mention other commercial real estate classes.  

First off, a primer on how cap rates work.  A cap rate is defined as the NOI divided by the purchase price of the facility.  Using a very simple example, if a facility has $1 million in NOI and it has a 10% cap rate, the facility will be worth $10 million ($1 million / .1).  

Average cap rates vary based on industry trends and interest rates, but currently average cap rate ranges are as follows:

• Independent Living - 7.0%-8.0%
• Assisted Living - 8.0%-9.5%
• Skilled Nursing - 12.5%-13.5%

There are three reasons that Skilled Nursing facilities have much higher cap rates than Assisted Living or Independent Living facilities: 

1. Reliance on Government Reimbursement: There is no question that the majority of Skilled Nursing facilities rely on Medicaid and Medicare reimbursement for the majority of their revenue sources.  Assisted Living typically has very little Medicaid reimbursement and Independent Living has no government reimbursement (unless it's low income housing). 

This can have an enormous impact on value because if the state cuts its Medicaid rate by 10%, every SNF in the state will lose 10% of its Medicaid revenue with little that the facility can do to recoup it.  If the federal government cuts its Medicare rate by 5%, every SNF in the country will lose 5% of its Medicare revenue.  This decline in revenue dramatically impacts the bottom line.

While other real estate classes are affected by economic trends, both nationally and locally, government reimbursement is an added risk for the Skilled Nursing class that needs to be factored into expected returns and hence, values / cap rates.

2. Additional Liability:  As the acuity level of the residents increases, the risk of liability increases.  A resident that needs more assistance is going to be more likely to have an accident or unexpected downturn in his/her health, which can lead to greater risk of a lawsuit.  In states that do not have tort reform, this can be a large risk that is not easily insured against, even with liability insurance policies. 

3. Increased Specialization in Care:  Additionally, as the acuity level of the residents increases, the specialization and expertise needed to care for those residents increases.  An operator of Skilled Nursing facilities needs to hire more competent staff with a greater level of skill in caring for residents than Assisted Living or Independent Living operators.  

While an operator needs to consider the increased risk of running Skilled Nursing facilities, higher cap rates lead to greater investment returns than most other commercial real estate classes. 

For more information, contact Matthew Alley at alley@slibinc.com or 630-858-2501

Brad Clousing and Jeff Binder Sell 62 Unit Seniors Housing Community in Alabama

Jeff Binder and Brad Clousing sold a 62 unit seniors housing community consisting of 15 independent living cottages, 35 assisted living units and 12 memory care/SCALF units. The community benefits from being the largest facility in Walker County and the only facility in the area offering memory care services. This is the only facility the Seller operates in Alabama and was divesting of the asset in order to deploy capital to other projects and consolidate operations. The property was built in stages in 1998/2004/2006 and census averaged 94%. Senior Living Investment Brokerage, Inc. was able to generate national interest in the community. Multiple offers were procured and a national REIT was selected as the Buyer. The property will be run by a regional operator based in Florida- this is their second building in Alabama. The community sold for $7,000,000 at an 8.50% capitalization rate. For additional information, please contact Brad at clousing@slibinc.com or Jeff at binder@slibinc.com

Retrades Defined (and what it means for you):

Retrades have become a relatively common occurrence in seniors housing M&A.  For those readers who are fortunate enough to have not experienced this, a retrade is renegotiating the agreed upon purchase price - oftentimes at the point after the buyer has completed due diligence and earnest money is about to become non-refundable.  Retrades are often linked to some unexpected decline in census or performance, or findings in the physical plant which will require major expense.  These retrades are much easier to negotiate than the times a buyer asks for a reduced price and it appears that they didn’t do their homework on the front end, or never planned on following through on their offer price which secured the deal.

There are two hurdles that retrades create: 

1. Seller’s Sales Expectations: If we are under contract on a facility for $12 million and before closing the buyer asks for a retrade down to $10.5 million and the deal falls apart, the Seller will never forget that at one time their facility was “worth” $12 million, even if all the other market feedback was $10-10.5 million.  The original buyer set an unrealistic sales expectation that can be very difficult to duplicate.

2. Wasted Time:  When a buyer retrades to a lower price, oftentimes our firm already had multiple offers in that lower range, only now we may be closing in on year-end or other deadlines and/or both sides have a significant investment into the deal.  

What does this mean for Sellers?  One benefit of working with Senior Living Investment Brokerage is to utilize our knowledge of who closes deals at or near the original terms and who “ties” deals up.  However, too many times the reason we have to deal with a retrade is because the seller “took their hands off the wheel” once the deal was under contract.  A Seller needs to run the community as if they weren’t selling- right up until the day of closing.

What does this mean for Buyers?  We have already experienced clients who request that potential buyers put up non-refundable earnest money at the time of signing the LOI.  That doesn’t fly in today’s market, but we can see things moving that direction, even if only a “token” amount is non-refundable.  As more and more buyers enter the market, sellers are looking for ways to differentiate between Lookers and Closers.  

For more information, contact Toby Siefert at siefert@slibinc.com or 630-858-2501

Matt Alley Presents at the Texas Health Care Association

Matt Alley spoke at the Texas Health Care Association Annual Convention this week. Matt spoke on Tactical Debt Financing and Achieving Your Bottom Line. He co-hosted with Lancaster Pollard and Oxford Finance. The topic specifically related to buying and selling long term care and senior housing properties. For more information you can contact Matt at 630/858-2501 or alley@slibinc.com Matt is Managing Director at Senior Living Investment Brokerage, Inc.

Brad Clousing and Ryan Saul Procure a Buyer for Two Florida Skilled Nursing Facilities

Ryan Saul and Brad Clousing recently sold 2 Skilled Nursing Facilities in Northern Florida. Both facilities have solid reputations and have achieved at least a 40% Medicare mix since 2007. One facility is 60 beds and was developed by the Seller in 1999. The other property is 90 beds originally built as 60 beds in 1993 with a 30 bed Medicare addition in 2007. The dedicated Medicare wings at both locations contribute to the strong financial performance and high Medicare census. The Seller is a Florida based owner/operator. The Buyer is an investment group that leased the operations to a national provider. Senior Living Investment Brokerage sold the two properties for $139,000/bed. To find out how we can assist you in the sale of your seniors housing community, contact Ryan or Brad at 630/858-2501 or ryansaul@slibinc.com or Brad at clousing@slibinc.com

Patrick Byrne and Jeff Binder Sell Central Illinois Assisted Living Community

Jeff Binder and Patrick Byrne facilitated the sale of a 37 unit Assisted Living Community in Central Illinois for over $140,000/unit. The facility was developed by a group of local investors to service the local seniors housing residents. After years of stable operations, the facility experienced a downturn in 2011-2012 and a decision was made by the partners to sell. The Buyer was American Realty Capital which retained Good Neighbor Care as the operator. The census at the time of sale was 92%. The 37,000 square foot building was built in 2005. For additional information, please contact Pat Byrne or Jeff Binder at 314/961-0070.

Ryan Saul Achieves Record Price for Illinois Skilled Nursing Facility

Ryan Saul has sold a 292 Bed Skilled Nursing Facility in Norridge/Chicago, Illinois. The 99,979 square foot building on 1.36 acres, sold for over $135,274/bed, a record for Illinois. The Seller is a regional owner/operator who plans on focusing his energies on his other skilled nursing facilities in the Chicagoland area. The Buyer is a Chicago based owner that aligned with a local operator to run the property day to day. The overall census at the time of sale was 89% (23% Medicare/13% Private Pay). The price reflected the reputation of the property coupled with the rare opportunity to acquire facilities on the north side of Chicago. The capitalization rate at the time of sale was 8.10% on approximately $24,000,0000 in revenues. Aside from the record price per bed, the transaction took 47 days from listing engagement to closing. For additional information on this transaction or how Ryan can assist you in buying or selling your seniors housing community, contact Ryan Saul at 630/858-2501 or ryansaul@slibinc.com

Money Money Money.....Money and more Money

After attending this year's NIC Conference, it became abundantly clear that money (both debt and equity) are chasing nursing home and seniors housing deals.  Everywhere you turned, there were lenders and equity players looking for opportunities to place capital.  Times are good, real good, but how long will it last?  That is the question.  There are rumblings about HUD, Fannie, and Freddie reaching their limit.  This should provide opportunities for other capital in the space.

I know I am always beating my SELL drum, but really, if you have ever thought about selling, now is THE time.  Please contact Ryan Saul if you would like to know what your nursing home or seniors housing property is worth.  I am always available to put together a confidential analysis.

Matthew Alley and Jeff Binder Sell Two Idaho Assisted Living Communities

Jeff Binder and Matt Alley sold two Assisted Living Communities in Northern Idaho located approximately 30 miles from each other. The properties totaled 90 units and are newer (2005/2006), purpose built facilities aligned in a pod format on attractively landscaped sites. A Receiver was appointed for the properties in July 2012. There were two major challenges regarding the census once the Receiver was appointed: 1. "No further placement" order until September 2012, 2. The buildings did not meet bathroom/resident ratio. Significant capital was invested to bring the properties to code. The 2006 site is four 15 unit one and two story buildings on 1.43 acres totaling 34,700 square feet. The 2005 site is two 15 unit one and two story buildings on 0.82 acres totaling 18,300 square feet. At the time of sale, the census had risen to 71%. The Buyer is a national owner/operator looking to expand their presence in Idaho. The properties sold for close to $80,000/unit. For additional information, please contact Matt Alley at alley@slibinc.com or Jeff Binder at binder@slibinc.com

Patrick Burke Facilitates North Carolina Adult Care Home Sale

Pat Burke sold a 64 unit/120 bed Adult Care Home in North Carolina. The building was originally developed as a skilled nursing facility but was converted to assisted living in 1996. The community has struggled with occupancy (51%) and was 95% Medicaid census at the time of the sale. The Seller is a local couple that had owned/operated the community since 1996. The Buyer is an investment holding company based out of Hong Kong. The Buyer plans on investing over $1,ooo,ooo in renovations/capital improvements. They have engaged a national operator with a North Carolina presence. For additional information, please contact Patrick Burke at 630/858-2501 or burke@slibinc.com

Sell now - No regrets.....none

The market continues to face a shortage of quality seniors housing and long-term care communities available for purchase.  There is significant demand.  Both regional and national companies are looking for growth opportunities....especially with the end of the year quickly approaching.

I am sure you are enjoying your current cash flow and ROI.  Maybe you haven't even thought about selling.  Why?  If you could cash in at the top of the market, why wouldn't you at least explore the idea?  You don't want to look back 3-5 years from now and regret not selling.  Do you know what your nursing home, assisted living, independent living or memory care facility is worth today?  Let me help you find out.

Everyone knows that interest rates are going to increase.  This will inevitably decrease the value of your facility.  Things are great now, but we all know things change.  Why not take advantage of just how great the market is?

I am always available for a confidential proposal to determine what your community is worth.  Please contact Ryan Saul for more information.

Senior Living Investment Brokerage, Inc. Sells Oregon Assisted Living Facility

Senior Living Investment Brokerage, Inc. facilitated the sale of a 32 unit/38 bed assisted living facility in eastern Oregon. The Seller is a local owner/operator that originally developed the building in 1995. They are retiring from the business. The Buyer is a regional operator out of Idaho looking to expand their presence in the region. The census at the time of sale was 97% and the ultimate sales price of $2,700,000 ($84,375/unit) for a 11.3% capitalization rate. The Buyer also has an option on an adjacent 5.7 acre parcel of land with the intention of developing a secure memory care facility. For additional information, please contact Senior Living at 630/858-2501 or 314/961-0070 www.slibinc.com

Matthew Alley and Nick Cacciabando Sell 100+ Beds in Texas

Nick Cacciabando and Matt Alley sold 100+ Medicaid-certified beds in Texas. Under Texas regulations, the Buyer will be able to utilize a 25% increase in Medicaid beds when building a new nursing home. The Buyer is a developer that also owns several Skilled Nursing facilities in Texas and has plans to build a new facility and benefit from the additional beds issued by the state. For additional information on how Senior Living can assist you in the sale or purchase of Medicaid beds in a CON state, please contact Matt at alley@slibinc.com or Nick at nbando@slibinc.com

Nick Cacciabando Sells Colorado Skilled Nursing Facility

Nick Cacciabando was engaged to sell a Colorado Skilled Nursing Facility for a regional owner/operator. This was their only facility and the Seller intends on acquiring a property in their core market, Iowa, using a 1031 Exchange. It is an older building in a quality market in the Denver MSA. Because of the age, the Buyer was able to purchase the facility at a relatively low cost. The Buyer is a start-up owner/operator based in Colorado. The Buyer has identified numerous operating inefficiencies and opportunities within the market. The facility was profitable at the time of sale and sold for a 13.4% capitalization rate/0.8 EGIM. Nick was able to procure multiple offers from interested parties. For additional information, please contact Nick Cacciabando at 314/961-0070 or nbando@slibinc.com

Patrick Burke Handles North Carolina Sale

Pat Burke has sold a 21 unit/42 bed Adult Care Home in North Carolina. The 14,000 square foot building is on 13 acres. The Sellers had plans to develop independent living on the site as well. The census was 88% at the time of sale and had a quality mix of 50% private pay and 50% Medicaid. The Buyer of the community is a local non-profit that owns and operates more than a dozen assisted living facilities in North Carolina. The new owner plans on upgrading the building and possibly adding independent living. The sales price was over $75,000/unit. For additional information, please contact Patrick Burke at 630/858-2501 or burke@slibinc.com

Jeff Binder Sells ALF/MC Community in Iowa

Jeff Binder sold a 42 unit Assisted Living and Memory Care Community in one of the fastest growing cities in Iowa. The community consisted of 36 assisted living units and 6 memory care units. Originally constructed in 1995 as a condominium, it was converted and renovated for assisted living in 2000. The three story building is comprised of approximately 29,000 square feet on 0.6 acres. The spacious units have a number of amenities not typically found in assisted living communities such as gas fireplaces and balconies. At the time Senior Living was hired to market the community, the occupancy was near 70% and had been experiencing a slow decline in performance over the past 4 years. The Seller is an Iowa owner/operator divesting this asset in order to exit the seniors housing sector. The Buyer is a regional owner that plans to use their broader base to gather economies of scale. For additional information on this transaction, please contact Jeff Binder at 314/961-0070 or binder@slibinc.com

Jeff Binder Handles Michigan Skilled Nursing Transaction

Jeff Binder has sold 2 Skilled Nursing Communities in Michigan. Both of the communities are located in Eastern Michigan. One of the buildings has 124 beds and was constructed in 1989. The two-story building has approximately 48,000 square feet on 1.89 acres. The other building was constructed in 1966 and renovated in 1985 and has 149 beds. The one-story building has approximately 58,000 square feet on 5.3 acres. Although the overall census for the two communities was only 66% at the time of the sale, Jeff was able to procure multiple offers with a final sales price of $8,000,000. The Seller, a national healthcare and senior living services provider, was seeking to divest these assets to utilize the capital for other corporate purposes. The Buyer is a regional owner/operator seeking to increase their operating presence in Michigan. For additional information, please contact Jeff Binder at 314/961-0070 or binder@slibinc.com

Matt Alley and Jeff Binder Sell Texas Skilled Nursing Facility

Jeff Binder and Matt Alley have sold an 80 bed Skilled Nursing Facility outside San Antonio. The facility was operated by a regional operator from San Antonio and owned by a trust. The facility has enjoyed a solid census with a favorable payor mix. It is a single story building built in the 1960's. The Buyer is a publicly traded REIT with other facilities in Texas and the new operator is out of San Antonio. Senior Living Investment Brokerage, Inc. was able to procure multiple, qualified offers for the trust. For additional information, please contact Matt at alley@slibinc.com or Jeff at binder@slibinc.com

Interest Rates and REITs

When interest rates start hitting the headlines, watch out.  We have seen the largest interest rate increase over the past few months.  We all know the Fed is going to slow down the bond buying efforts as the economy improves.  As interest rates increase, the value and appetite of REITs to aggressively acquire decrease.

Over the past 5-7 years, the REITs have maintained the lowest cost of capital in the low interest rate environment.  This has been a huge source of financing for many owners and buyers of Seniors Housing and long-term care properties.  Billion dollar deals in the headlines for REITs placing capital.  Could the end be near?  Not yet . . . . 

I don't see rates drastically increasing in a short period of time.  Rather, there will likely be smaller increases over a longer period of time.  What does that mean?  Act NOW.  If you have thought about selling, now would be an ideal time.  Sell in one of the strongest markets in history while you still can.  It is only a matter of time before the increase in interest rates causes a disconnect between seller expectations and what a buyer can pay based on their cost of capital.

Please contact Ryan Saul for a proposal to determine your current market value.

Ryan Saul Sells 50 CON Beds in Ohio

Ryan Saul has sold 50 Certificate of Need (CON) Beds in Ohio.  The Seller was looking to retire from the business and this was the only property he owned.  Because the facility was originally constructed in 1897 as a hospital and renovated in 1945, it was functionally obsolete.  Therefore, Senior Living Investment Brokerage, Inc. was able to sell the beds and the owner donated the vacant building to a not-for-profit for the tax benefit.  The Buyer is a regional owner/operator with 8 facilities in Western Ohio.  This was a strategic acquisition as they are focused on growing their regional company.  The Buyer plans on building a campus nearby that includes assisted living and skilled nursing.  For additional information, please contact Ryan Saul at ryansaul@slibinc.com or 630/858-2501.  Congratulations Harry and enjoy your retirement.

What to do about Alzheimer's?

Most development I have seen across the country has been for residents with Alzheimer's.  Will it be enough?  If you know anyone that has Alzheimer's, it is a terrible disease.  As the US population ages and grows, the number diagnosed is expected to triple by 2050.  They are predicting close to 14 million people will be affected by the disease.  This is millions more that previously anticipated.

This is going to be a huge challenge for our society and will challenge caregivers, facilities and personal financial safety nets.

Owners and operators of Seniors Housing should be preparing now for the tidal wave of those affected with Alzheimer's disease.  Repositioning assisted living and independent living facilities is an ideal way to serve these residents.

If you have thought about buying or selling a memory care, Alzheimer's, or assisted living facility, please contact Ryan Saul.

Matt Alley Sells Texas CON

Matt Alley has sold a 56 bed Medicaid Certificate of Need in Texas.  The buyer is a developer located in East Texas with several facilities in Texas.  The buyer will benefit from the additional Medicaid beds that the state issues when a new facility is built.  For additional information please contact Matthew Alley at alley@slibinc.com or 630/858-2501