High-Value Seniors Care Portfolios in Play

Buyers and sellers in the seniors care facilities market are in agreement that the time is good for business as evidenced by many recent high-quality portfolio sales. Two …

Buyers and sellers in the seniors care facilities market are in agreement that the time is good for business as evidenced by many recent high-quality portfolio sales. Two large buyers include Five Star Quality Care and Ensign Group, Inc., with the former closing on a $123 million sale of facilities in Indiana, and the latter investing $27.65 million for facilities in Iowa and Nebraska. Both publicly-traded companies seem to have set their sights on properties in the Midwest despite a lack of presence in the area prior to the acquisitions. For more on this continue reading the following article from National Real Estate Investor.

Sales of seniors housing portfolios are heating up as owners of multiple properties find it an opportune time to exit the market while buyers seek to expand their holdings.

Take, for example, two large recent portfolio sales arranged by broker Mark Myers, senior vice president in the Chicago office of Marcus & Millichap Real Estate Investment Services.  

Myers, along with Christopher Hyldahl of the firm’s West Los Angeles office, negotiated the $123 million sale of a property portfolio that consists of six seniors housing campuses in Indiana.

The seller was BAI of Indiana, a private, family-owned investment partnership. The buyer was Five Star Quality Care, a publicly traded seniors housing owner and manager based in Newton, Mass.

Another recent sale, brokered by Myers, for $27.65 million featured a portfolio of nine nursing homes in Iowa and Nebraska, representing the first eastward push by California-based buyer, the Ensign Group Inc.

“We’re seeing high-quality portfolios come to market,” notes Myers. “With interest rates low and seniors housing fundamentals strong, it’s a good time to sell.”

Though the big REITs have grabbed the spotlight with high-profile portfolio purchases, regional companies are buying portfolios as well. They’re paying anywhere from about $20 million to $100 million for 10 to 20 buildings.

It’s a chance for regional operators to enter new markets while garnering some of the efficiencies associated with buying a handful of buildings in one fell swoop instead of one property at a time.

Claim up to $26,000 per W2 Employee

  • Billions of dollars in funding available
  • Funds are available to U.S. Businesses NOW
  • This is not a loan. These tax credits do not need to be repaid
The ERC Program is currently open, but has been amended in the past. We recommend you claim yours before anything changes.

“It’s more work to buy a single property than a group,” notes Myers. He adds that portfolio buyers with an established operation usually enjoy a lower cost of capital than a small investor. “Lenders favor the strongest borrowers,” he says.

Spotlight on Hoosier State

In the sale to Five Star, three of the campuses are in the Indianapolis area. The other properties are located in Ft. Wayne, Kokomo, and Noblesville. The Noblesville project is called Riverwalk Village.

All the properties have been operating under the brand name American Senior Communities, but will now operate under the Five Star Senior Living name.

The facilities were built in the late 1990s and some have had recent updates. The portfolio-wide occupancy rate is currently 92%. Five Star owns and operates 10 other seniors housing projects in Indiana.

The six campuses include about 700 total units, with 500 assisted living apartments and 200 patio-style rental homes for independent seniors. Rents average approximately $3,000 a month. Patio home rents range from about $1,600 to $2,100 a month. Assisted living rents are as much as $4,000 a month.

“These are high-quality assets located in solid markets, and their acquisition allows us to further strengthen our presence in Indiana,” says Five Star Vice President Timonthy Bonang.

He adds that the purchase increases the private pay component of the company’s payer mix while decreasing the company’s overall exposure to government-funded programs like Medicare and Medicaid.  

Five Star Quality Care (NYSE: FVE) operates 228 senior living communities. The company owns 27 properties, leases 191 communities, and manages 10 others.  Five Star’s stock price closed at $2.97 on Monday, Aug. 22, down from $4.36 a year ago.

Ensign ventures into Midwest

In another portfolio sale, the Ensign Group acquired nine skilled nursing facilities for $27.65 million from Sioux City, Iowa-based Careage Management. Five of the properties are located in Nebraska and four are in Iowa.

The average occupancy rate of the portfolio is approximately 74%. The sale included Careage Home Care, a small home health agency based in Cherokee, Iowa. There are no immediate plans to change the names of the Iowa and Nebraska facilities, according to Greg Stapley, senior vice president at Ensign.

Careage President and CEO Dan Myers said in a press release that the company had considered offers from other buyers.

Ensign owns and operates 96 properties. Ensign (NASDAQ: ENSG) also owns three hospice companies and three home health businesses.

The company’s stock price closed Aug. 22 at $21.95, up from $17.47 a year ago. Like other nursing home companies, Ensign’s stock took a hit Aug. 1, dropping about 22%, after the government announced an 11.1% cut in Medicare reimbursement rates.

The purchase by Ensign represents its first big step outside the western U.S. When entering new markets, the company typically seeks strong-performing, multi-facility portfolios, according to Christopher Christensen, Ensign’s president and CEO.

“We expect the former Caregage facilities to pave the way for additional disciplined growth in Nebraska, Iowa and the Midwest.”

This article was republished with permission from National Real Estate Investor.


Does Your Small Business Qualify?

Claim Up to $26K Per Employee

Don't Wait. Program Expires Soon.

Click Here

Share This:

In this article