Different types of buyers in the Senior Housing Market

There are many types of buyers in the senior housing market and sometimes it can get confusing for sellers to know who they are really dealing with.  While it is great to get a high-price offer for your community, if the buyer doesn't have the ability to close, it is doesn't matter how good the offer is.

There are four main types of buyers:

1.       Real Estate Investment Trusts (REITs) – REITs are publicly or privately traded real estate companies that typically have ample cash available to acquire properties.  Most of the time REITs buy a community and at closing, sign a long term NNN lease with a local or regional operator to operate the community.  REITs typically buy with cash. 

2.       Private Equity Companies – They come in all different sizes from multi-billion dollar companies like the Carlyle Group to much smaller companies.  Private Equity companies typically buy properties and use a management company to operate them.   Private Equity companies typically buy with cash or with a large line of credit.

3.       Local and Regional Operators – Local and Regional operators may own/lease 5-50+ communities.  They may use a REIT or Private Equity company as a partner or may buy a community on their own.  If they are buying a community on their own, they typically use bank debt and raise equity internally with high net worth individuals, and through friends and family.

4.       “Mom and Pop” Operators – They typically own from 0-5 properties.  Most REITs and Private Equity companies will not partner with Mom and Pop operators because they are too small and the communities they operate are not large enough.  They typically buy with personal equity or friends and family’s equity, and bank debt.

As a seller, it is important to understand what type of buyer is making an offer to buy your community and how they plan to financing the purchase.  Far too many buyers try to put communities under contract to buy, and THEN try to find the equity and debt.   This often times lead to delays in closing, cancelling the offer to purchase, or retrading at a lower price.

At Senior Living Investment Brokerage, Inc. we have relationships with over 1,700 of different types of buyers and can help you understand what type of buyer is making an offer, their track record in closing deals and how they plan to finance it.

For more information on selling your community, contact Jason Punzel at 630-858-2501 x 233 or punzel@slibinc.com.

Brad Clousing and Ryan Saul Sell Georgia Personal Care/Memory Care Community

Ryan Saul and Brad Clousing sold a Personal Care and Memory Care community in Oakwood, Georgia. Oakwood is located in the northern portion of the Atlanta MSA. It was built in 1998 and underwent an extensive renovation and additional units were added at this time bringing the total square footage to 36,766. Census at the time of sale was 92%. The Buyer is an institutional owner/operator. It was a cash purchase with the intent of placing FNMA debt on the asset. The Seller was a local owner that used a third party manager. The purchase price was $11,750,000. For additional information please contact Ryan at ryansaul@slibinc.com or Brad at clousing@slibinc.com 630/961-2501

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

Payor Mix is the Key!

The recession has caused state tax receipts to decline dramatically, which has forced many states to face large budget gaps. Medicaid has become the largest line-item on many states' budgets. This has caused many states to look towards Medicaid reimbursement as an area for cuts to close that gap.

What does this mean to the senior housing industry? As states contemplate cuts large and small (up to 34% has been rumored in certain states), we believe that there will be a flood of capital into Skilled Nursing Facilities that rely largely on Medicare and Private Pay residents. We also believe that there will be more of an interest in Private Pay Assisted Living Facilities as these Medicaid cuts are finalized.

How is the Senior Housing M&A market currently? We believe that there is more equity and debt financing available in this market than there has been for the past couple years. Public and private REIT's have been sitting on a great deal of capital during the recession and are now looking to deploy that cash into senior housing facilities. Additionally, there are more lending options (i.e. bridge financing, more aggressive conventional lending) for acquirers to take advantage of than there were over the past 24 months.

What should I do to set my facility up for a successful sale at maximum value? The current acquisition market is still very "cap rate driven". It is important to maximize profitability, while maintaining a strong payor mix. Given the current environment, capital is flowing much more aggressively into properties that have a high Private Pay and Medicare census.

How does this impact the potential sale of my facility? If you have an Assisted Living, Independent Living, or Skilled Nursing Facility with a strong payor mix, it is a great time to explore selling your senior housing facility.

Senior Living Investment Brokerage, Inc. sold approximately $300 million in transaction volume in 2010 and $90 million in the first quarter of 2011.

SLIBCO provides non-binding marketing proposals, whether you’re interested in selling soon or are just curious of your facility’s value.

Contact me via email at alley@seniorlivingbrokerage.com

Matthew Alley
Senior Vice President

Matthew Alley Closes Another Texas Transaction

Matthew Alley has sold a 118 Bed Skilled Nursing Facility in Texas. The single story, 44,000 square foot facility was built in 2004. The purchase price was $7,250,000 ($61,440/bed) which was a 13.8% capitalization rate. The census at the time of sale was 75%. The Buyer is a regional owner/operator with several facilities in Texas. Conventional financing for the acquisition was provided by a regional bank. For additional information please contact Matt at 630/858-2501.

Ross Sanders Closes Independent Living Facility Transaction in Iowa

Ross Sanders of Senior Living's St. Louis office has sold a 16 unit Independent Living Facility in Iowa. The facility is located in one of the largest cities in Southeast Iowa and was constructed in 2000. The Seller was a Texas based investment group that purchased the asset out of foreclosure in 2006. The Buyer is a local seniors housing owner/operator who hopes to increase census and cut operating costs. The new owner will also have the opportunity to almost double the size of the existing facility on the vacant 3 acres included in the purchase. For additional information please contact Ross at 314/961-0070.

Brad Clousing Sells Seniors Housing Conversion in Florida

Brad Clousing sold a luxury boutique hotel in Melbourne, Florida, for a Chicago based lender. The hotel was originally built in 1973 and had significant hurricane damage in 2006, renovated and reopened in 2008.
Given the large room sizes, attached restaurant (currently vacant) with commercial grade kitchen and excellent location, the property was very appealing as an assisted living conversion. The building overlooks the intercoastal waterway with unobstructed water views less than one mile from Holmes Medical Center.
The Buyers have projected approximately $1,75 million will be spent to complete the conversion to assisted living. The purchase price was $4.5 million for what will become a 129 unit ALF. For additional information contact Brad Clousing at 630/858-2501.

Ryan Saul and Jeff Binder Sell Indiana Independent Living Facility

Jeff Binder and Ryan Saul have announced the sale of a 54 unit Independent Living Facility in Indiana. Originally developed in 2000 by a local hospital, the facility has been operated by a local nonprofit board since 2007. The management team was able to improve operations over the past 3 years and hired Senior Living Investment Brokerage, Inc. to sell the facility. At closing, the census was 100% with a waiting list. The Buyers plan on applying to license the facility for Assisted Living and also expand the facility to provide Skilled Nursing.
For additional information, please contact Ryan Saul or Jeff Binder.

What Are You Seeing in the Market?

In the Senior Housing and Long-Term Care industry there has been a common belief that the slowing of the overall economy and restricted availability of capital that began in mid-2007 would cause a massive influx of properties coming onto the market as a result. So, where are they?

The common question right now is, “Where is all the deal flow?” Most buyers and operators felt there would be a large amount of sellers forced into the marketplace due to the inability to refinance properties, over leveraged properties, or facilities struggling with operations/occupancy.

The Numbers:

Let’s take a look at the number of transactions as well as related dollar volume for the past couple of years.

I think it makes sense to mention that for both 2006 and 2007, the five largest deals were all over $1B and accounted for approximately 60% of the dollar volume in the industry. Removing all transactions over $1B from the statistics, the remaining statistics dollar volume statistics look more like this:

Since 2006, the number of transactions is down (by 38.3%). However, from 2008 to 2009, the number of transactions is only down by (6.25%). The data also indicates that during the past three years, the number of “large” deals is has dwindled with the deteriorating credit markets. Take heed, when compared to other assets classes, we seem to be fairing relatively well despite the current credit markets.

As you can see in the following table, the year over year commercial real estate transaction volume from 2008 to 2009 was down, from 56% to 65%, depending on the property type.

The good news is that the dollar amount produced in 2009 happens to be approximately what the dollar volume was in 2003, the last time the acquisition market was struggling to get out of a recession. One noteworthy difference is that the industry fundamentals are much better today than they were in the 2002/2003 period. So what does this mean if you are an owner with a property you are contemplating selling in today’s market? After all, what is behind us is behind us.

Here is what we can tell you. Although the credit markets are more challenging than they were two years ago, we are completing transactions at aggressive prices. Our biggest hurdle is keeping an inventory of facilities to sell. While cap rates have ticked up somewhat for assisted and independent living properties, they are still at historically aggressive levels. The demand for nursing homes and assisted & independent living properties is through the roof due to the lack of supply in the market. Each time we list a property we continue to be amazed at the level of interest we are able to generate, simply because there are so few properties available. This, combined with a pent up demand from investors eager to grow their portfolios creates strong demand and pricing.

The result is multiple, qualified offers for each building we market. 2009 was Senior Living Investment Brokerage’s best year as far as number of properties sold and 2010 is shaping up to compete with or surpass our 2009 totals.

I would be happy to prepare a confidential analysis for any properties you may consider divesting. Contact Michael Brundage at brundage@seniorlivingbrokerage.com for more information.

Jeff Baxter Joins Senior Living Investment Brokerage

Jeff Baxter has joined Senior Living Investment Brokerage as a Senior Associate. Jeff will focus on seniors housing sales in the Southwest. Prior to joining Senior Living, Jeff began his career working in Private Client Services for UBS Financial Services Inc. Since 2005 he has served his alma mater, Wheaton College (IL) as Director of Principal Gifts, structuring numerous capital and endowment gifts of $1 million+ as part of their most recent $260 million campaign. Jeff earned his BS in Business and Economics from Wheaton College in Wheaton, IL. Jeff can be reached at 630/858-2501 or baxter@seniorlivingbrokerage.com

Patrick Byrne and Ryan Saul Sell Assisted Living Facility in Southern Illinois

Ryan Saul and Patrick Byrne have sold a 29 unit Assisted Living Facility in Metro East St. Louis for almost $100,000 per unit. The Seller had purchased the facilty to take advantage of an expiring 1031 exchange. He had no prior seniors housing experience and the facility struggled as a result. The Buyer is an experienced senior housing owner/operator and is confidentthey will be able to create efficiency within the operations. The facility, built in 1999, was sold with an adjacent lot that the new owners intend to use to expand the facility to 40-45 units. The sales price netted a 6.6% cap. rate. For additional information, please contact Patrick Byrne or Ryan Saul.

Clousing and Binder Sell East Coast Florida Assisted Living Facility

Jeff Binder and Brad Clousing have sold a 44 unit assisted living facility on A1A in Florida. The 44 unit facility is 32,000 square feet and was built in 1996. Census at closing was 60%. The Seller is one of the larger owner/operators in the U.S. and had purchased the facility as part pf a multi-state/multi-facility transaction in 2006. The Buyer is a regional operator out of Florida.
The Seller assisted the Buyer by providing Seller financing in the form of a second mortgage. The primary financing is being provided in the form of conventional financing by a regional lender out of Central Florida.
Please contact Brad or Jeff for additional information.

Ryan Saul and Jeff Binder Sell Wisconsin SNF

Senior Living Investment Brokerage successfully sold a 161 Bed Skilled Nursing Facility in Northern Wisconsin for the second time in six years. Originally sold in 2005 while in bankruptcy, the Buyer was attracted to the favorable bed price, potential for improving Medicare census and challenge of a turnaround situation. This was the only facility the Seller owned in Wisconsin and they had achieved their goal of turning the facility around. The Buyer is a regional operator and this acquisition will improvew their economies of scale. The Buyer utilized HUD Lean financing.

Jeff Binder of Senior Living Sells Missouri SNF

Jeff Binder sold a 74 Bed Skilled Nursing Facility in Northwest Missouri November 1, 2009. The Seller because the facility was no longer an operational, or geographical, fit given their relatively light exposure in the state of Missouri. The Buyer was a regional long-term care provider with three other facilities in Missouri. The facility had a sufficient quality mix but overall census was around 50%. The Buyer has experience with rural facilities and has plans in place to enhance census and profitability via expanded services.

Senior Living Announces Two Sales

Jeff Binder and Nick Cacciabando sold a 39 bed Assisted Living Facility in the Oklahoma metropolitan area. The facility sold for over $105,000/unit and at a 9.9% capitalization rate. The Seller was a regional owner/operator and the buyer is a local owner operator with three other senior housing facilities. Financing was provided by a regional bank out of Kansas City.

Ryan Saul sold a facility in Dayton, OH, with 331 licensed skilled beds and 57 independent living units. The 445,000 square foot facility on 25+ acres was built in 1930 and sold by one of the largest Catholic health systems in the country. At the time of sale, the facility had negative cash flow. Financing was provided by a national bank out of Chicago.

Why Hire An Exclusive Broker?

If you are anything like me, you would not consider selling your home without the assistance of a trustworthy real estate professional. In our line of business, however, we often encounter owners of Nursing Homes and/or Assisted Living facilities who are reluctant to engage a professional to effectively market their properties. It is surprising that while most people willingly engage an agent in the sale of their home in order to obtain top dollar for their valued asset, others attempt to sell a multi-million dollar business on their own, running the risk of leaving a significant amount of money on the table.

The exclusive representation provided by Senior Living Investment Brokerage (“Senior Living”) creates a value for property owners that far outweighs the fees associated with entering into such an arrangement.

An exclusive representation agreement with Senior Living consists of two basic principles:

1) The owner agrees to sell the property and to list it only with Senior Living.

2) Senior Living commits its full expertise, experience, and resources to aggressively and confidentially market the property and to loyally represent the owner throughout the entire transaction.

Why Engage Senior Living With An Exclusive Agreement To Sell Your Senior Housing/Long-Term Care Community?

1) Confidentiality. When working with multiple brokers, they may not understand the importance of controlling to whom the information is sent and the intricate nature of facilitating confidentiality throughout the marketing process. We only contact potential buyers directly via an initial telephone conversation. Only upon receipt of an executed Confidentiality Agreement is any specific property information disclosed.

2) Higher price. Professional representation by Senior Living, a specialized company, exposes the property to a much larger market of buyers, thus increasing the price by more than the fees.

3) Sends a Message to the Market. Engaging Senior Living sends a strong message to the marketplace that, not only is the owner committed to selling the property, but that the likelihood of a successful closing is better. Therefore, more investors will devote time to the offering and ultimately bid higher on the property.

4) Establishes Pricing Expectations. This saves the owner time, effort and energy in that he or she will not have to fulfill numerous requests for information only to learn that the prospective purchaser’s price expectations are not in line with the current value of the property.

5) It Saves the Owner Time. In addition to promoting the property, Senior Living will minimize the owner’s time involvement by screening and presenting offers, fulfilling information requests, assisting in arranging financing, coordinating inspections and reviewing escrow documents.

Selling a Long-Term Care facility requires professional representation and Senior Living will achieve the highest price for your property. Our commitment to selling only Long-Term Care & Senior Housing and track record of success demonstrate this.

Feel free to contact me with questions at Michael Brundage.

By Michael L. Brundage,
Senior Vice President

Senior Living Announces Sale of Assisted Living Facility

Ryan Saul sold Harbor House Assisted Living in Wheeling, IL. The property consists of three identical one-story cottages with each building containing 12 units with 16 licensed beds. Census at the time of sale was 85%. Senior Living investment Brokerage has sold 22 facilities in 2009.

Grant Kief
President
Senior Living Investment Brokerage, Inc.

Welcome

Welcome to the Senior Living Investment Brokerage blog. Our brokers will be posting industry updates that I hope you will find informative and useful. In addition, we will use this platform to announce our sales of nursing homes, assisted living facilities, independent living facilities, CCRC's and all other forms of seniors housing. We will also post links to industry sites that we have found helpful.

We will be updating the blog each Wednesday-so check in weekly for our updates. Also, let us know if you have any suggestions for discussions. We also welcome your comments.

Don't forget, National Nursing Home Week" is May 10-16. This year's theme is "Nurturing a Love that Lasts".

We look forward to your comments.

Grant Kief
President
Senior Living Investment Brokerage, Inc.