Is Now a Good Time to Sell?

This is the question that I am asked most often in my conversations with owners and operators of senior housing communities.  The answer is never simple and depends on several factors.  What are some of these factors?

 

1. Is it a strong market?  The answer is a resounding yes.  There is more debt and equity to be placed now than in recent memory and not enough inventory on the market to keep up.  Simple supply and demand theory leads to higher pricing.  

2. How is my facility performing?  While that answer is different for every community, it is likely that as the summer is almost over and the fall is beginning, your community is operating at its peak levels for the year. 

3. When do I want to close?  Many potential sellers want to sell before the beginning of a new year in order to reduce partial year paperwork, i.e. cost report, prorations, capital gains tax treatment.  It typically takes 3-4 months to close, so if you want to close by year end, now is an ideal time to list your facility.

4. Is the cost of capital low?  When the cost of debt (interest rates) and equity (internal rates of return) is low, buyers can afford to pay a higher price for obvious reasons.  Interest rates are near historical lows and with the economy improving, there is risk in those rates increasing.  Equity internal rates of return are also very competitive right now.  All of this leads to low costs of funds for buyers and lower cap rates for sellers!

Although I don't have a crystal ball, there may never be a better time to consider a sale of your long-term care or senior housing community.  For a complete analysis of what your community is worth, contact Matthew Alley – alley@slibinc.com or (630) 858-2501

Matthew Alley Sells Another Texas SNF

Matt Alley has sold another Skilled Nursing Facility in Texas. The property consists of 199 licensed beds/165 usable beds. The facility was built in 1963 with an addition in 1973 and most recently remodeled/upgraded in 2011. The facility enjoys a strong census (84%) but is reliant upon Medicaid residents(80%). The single story building consists of 47,250 square feet and is located approximately 90 miles east of Houston. The property sold for a 13.3% capitalization rate/1.03 EGIM. The Seller was a regional owner/operator. The Buyer is an owner/operator from the Dallas/Ft. Worth area with several facilities throughout Texas. For more information, please contact Matthew Alley at alley@slibinc.com or 630/858-2501.

Patrick Byrne, Nick Cacciabando and Matt Alley Team up to Sell Missouri ALF

Senior Living Investment Brokerage, Inc. sold a 23 unit, 46 licensed bed assisted Living community in Missouri. The building is approximately 11,600 square feet constructed in 1996 on approximately 4 acres of land. The community is located just outside of Branson, Missouri. The building has historically ran close to 100% census with stable financials. The sales price $2,300,000 ($100,000/bed) produced a cap rate of 10.5%/3.02 EGIM. The Seller was is an independent owner/operator exiting the business. The Buyer is a regional owner/operator based in Idaho with other operations in Missouri. For additional information, please contact Pat or Nick at 314/961-0070 or Matt at 630/858-2501

Matt Alley and Jeff Binder Handle Texas Memory Care Facility Sale

Jeff Binder and Matt Alley recently sold a 36 unit/48 bed Texas Memory Care Facility approximately 65 miles northwest of San Antonio. Built in 1997, the property is approximately 25,000 square feet and is situated on 2.5 acres of land. The community was underperforming due in part to recent turnover in staff. The census at the time of sale was 56%. The Buyer expects to be able to take advantage of increasing the marketing budget and stabilizing the staffing. The Seller is a national REIT divesting non-performing assets. The Buyer is a regional owner/operator based in Texas. For additional information, Please contact Matt Alley at alley@slibinc.com or Jeff Binder at binder@slibinc.com

Brad Clousing and Matt Alley Represent Seller of Alabama ALF/MC Community

Matt Alley and Brad Clousing sold a 27 unit Assisted Living/15 unit Memory Care (SCALF) Community in Jacksonville, Alabama. The building is approximately 26,500 square feet on approximately 4.6 acres and was built in 2009. The site offers an expansion opportunity and the Seller has an active CON for an additional 9 SCALF beds that are not being utilized. The Buyer intends on expanding the building with a new separate secured memory unit and potentially adding cottages to the site. The Seller is a local partnership that is exiting the industry. The Buyer is a regional owner/operator and this is their first acquisition in Alabama. The asset was at 79% occupancy at the time of sale and sold for a 7.3% capitalization rate. For additional information, please contact Brad at clousing@slibinc.com or Matt at alley@slibinc.com 630/858-2501

Matthew Alley Sells a Texas Skilled Nursing Facility.

Matt Alley has sold a 115 bed skilled nursing facility in East Texas. The multi story, 57,500 square foot building was originally constructed in 1919 and the census at the time of sale was 72%. The Seller is a national operator headquartered on the East Coast. The Buyer is an owner/operator located in Central Texas already operating several facilities throughout the state. The transaction was funded by a local community bank. For additional information, please contact Matt Alley at alley@slibinc.com or 630/858-2501

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

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.

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

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

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

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

Matt Alley and Ryan Saul Sell Texas Skilled Nursing Portfolio

Ryan Saul and Matthew Alley have sold 3 Skilled Nursing Facilities in Texas,  The facilities combined for a total of 337 beds.  They were operated by a regional operator based in San Antonio and owned by a trust.  The Buyer is a publicly traded owner/operator with other facilities in Texas.  The properties are older (one built in 1940 while the other two were built in the 1970's) and the new owner will invest in the communities and hope to increase cash flow by improving operating efficiencies.  There is also room for improvement in census at two of the facilities.  For additional information, please contact Matt or Ryan at 630/858-2501.

Senior Living Investment Brokerage Sponsors Football Clinic

Senior Living Investment Brokerage was one of the lead sponsors for the 2nd Annual Youth Football Clinic for Africa New Life.  The clinic was formed to raise funds for providing water at a building in Kageyo, Rwanda.  The clinic raised over $5,000 for Africa New Life (http://www.africanewlife.org/). 

Please see the following link to an article on the clinic. http://www.dailyherald.com/article/20130515/sports/705159755/

Thank you Senior Living for your support.

Matthew Alley
Managing Director

Jeff Binder, Matt Alley and Toby Siefert Team Up to Sell New Mexico Assisted Living/Memory Care Community

Senior Living Investment Brokerage, Inc. was engaged to sell a 69 unit Assisted Living and Memory Care community in New Mexico.  The building consists of 54 assisted living units and 15 memory care units.  Originally constructed in 1964 as a hotel, the building was converted in 1990 to seniors housing.  The building was subsequently renovated in 2002 and again in 2010.  The one and three story building is comprised of approximately 63,500 square feet on 2.4 acres.  The community has a strong operating history and an excellent reputation in the market.  At the time of sale, the census was 87%.  The Seller is a national owner/operator based in Oregon who was divesting this asset to utilize the capital for other corporate purposes.  The Buyer is a regional owner/operator based on the east coast.  For additional information, please contact Toby Siefert or Matthew Alley at 630/858-2501 or Jeff Binder at 314/961-0070.  www.slibinc.com

Selling in a strong market

As debt and equity has become easier to access, the market for senior housing facilities has strengthened with cap rates, gross income multiples and per-bed numbers improving over the past 12 months.

There have been new investors entering the industry to take advantage of higher cap rates found in most other real estate sectors.  They have partnered with strong regional or local operators in order to acquire both cash-flowing and turnaround facilities.

What does this mean for an owner/operator?
The time has not been better to sell your senior housing facility.  While the uncertainty of "Obamacare", Medicaid reimbursement changes and concern over the future of Medicare undoubtedly weighs on all current operators, there continues to be aggressive buyers that are willing to purchase facilities at top dollar. 

What are the risks in holding?
An increase in interest rates, a retreating of debt and equity from the healthcare industry, major regulatory changes and cuts in reimbursement are all risks that could negatively affect your facility's value.

If you are considering selling your facility, take advantage of the current strong market.  Senior Living Investment Brokerage, Inc. provides non-binding marketing proposals.  We would be privileged to work with you in the sale of your facility.

Contact me via email at alley@slibinc.com or phone at (630) 858-2501.

Matthew Alley
Managing Director 

Matt Alley and Ryan Saul Sell 150 Bed Texas Skilled Nursing Facility

Ryan Saul and Matthew Alley sold a 150 Bed Skilled Nursing Facility in the Texas panhandle.  The facility was operated by a regional operator from San Antonio and owned by a trust.  The Buyer is a publicly traded owner/operator with other SNF's in Texas.  Originally built in 1963 and extensively remodeled in 2001, the facility has a strong census and a 12% quality mix.  The transaction closed at a .80x GIM.  Senior Living Investment Brokerage was able to filed several offers while maintaining confidentiality throughout the marketing process.  For additional information on this transaction, please contact Matt or Ryan at 630/858-2501.      

Matt Alley Sells Another Texas Skilled Nursing Facility

Matthew Alley has sold an 110 bed skilled nursing facility in Western Texas.  The facility is in a rural area and is the only facility in the county.  The one-story, 33,600 square foot building was constructed in 1996.  At the time of sale, the census was 82% and the facility sold for a 12.5% capitalization rate.  The facility was operated by a regional operator out of the Dallas-Fort Worth area and owned by a publicly traded REIT.  The Buyer is an owner/operator from Central Texas with several facilities throughout the state.  The purchase was financed by a local community bank.  For additional information, please contact Matt Alley at 630/858-2501 or alley@slibinc.com 

Jeff Binder and Matt Alley Broker Independent Living Facility

Matthew Alley and Jeff Binder sold an 131 unit independent living facility in Texas.  Senior Living Investment Brokerage was hired to confidentially market this attractive, three story independent living facility located in Longview, Texas.  The building, constructed in 1985 and 2010, is 102,350 square feet and offers a nice mix of studio, one and two bedroom apartments and offers ample amenities.  The property has a strong operating history, including several years at, or near, full census.  Additional care services are provided by a third party, unaffiliated home health agency.  The facility is on 4.52 acres with an additional 1.62 parcel of land included in the sale which could be used for future development.  The stable financial history, solid reputation and quality location helped secure multiple offers leading to a sale price of $13,000,000.  The buyer is a national owner/operator of seniors housing facilities.  Senior Living Investment Brokerage, Inc. was chosen to represent the seller for our reputation and ability to selectively market the facility in a confidential manner.  For additional information, please contact Jeff Binder at binder@slibinc.com or Matt Alley at alley@slibinc.com 

Congratulations

Congratulations to Senior Living Investment Brokerage's Top Brokers of 2012 and to another record setting year.
Ryan Saul, Jeff Binder, Matt Alley, Bradley Clousing, Patrick Byrne and Toby Siefert.  Congrats and good luck in 2013.