Monthly Archives: February 2017

February 27, 2017
Grant Kief

Assisted Living and Independent Portfolio Sale

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Assisted Living and Independent Portfolio Sale

Jason Punzel recently represented the Seller in an Assisted Living and Independent Portfolio Sale. The Assisted Living and Independent Portfolio Sale consisted of four properties in Washington. The portfolio consisted of a total of 368 units for a price of $78,000,000 ($212,000 per unit). All four communities are located in Seattle’s greater metropolitan area. The communities were all constructed between 1989 and 2005. The entire portfolio consisted of approximately 354,083 total building square feet.

Seller and Buyer Overview

The Seller is a local investment group looking to capitalize on the strong market. The Buyer is Capitol Seniors Housing. The communities will be managed by MBK Senior Living> The new owner is planning to make significant capital investments to upgrade the properties to be more competitive in their respective markets and to also convert some independent living units to assisted living units and into memory care units.

Contact

For additional information on this assisted living and independent living portfolio sale or for an analysis of your seniors housing community, contact Jason Punzel of Senior Living Investment Brokerage, Inc. at 630/858-2501 or at punzel@slibinc.com

February 20, 2017
Jason Punzel

Selling Seniors Housing Communities – Pro Forma vs. Actual Financials

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Selling Seniors Housing Communities – Pro Forma vs. Actual Financials – by Jason Punzel

When determining the price a buyer is willing to pay for a Senior Living Community, they look at many things.  Ultimately, though, every operating asset is worth the future cash flow it will produce and the exit sales price, discounted back to today’s value.   One of the best ways to predict future cash flow is by analyzing what the community is currently producing and what it has produced in the past.   The more consistent a community has produced cash flow over the past several years, the more confident a buyer will be that it will continue to do so and willing to pay more for the community because they will perceive it as lower risk (thus a lower cap rate).

However, often times a community, or any business, will go through financial ups and downs.   If an owner fixes the problem and increases cash flow over a period of time, most buyers will give the owner credit for its current higher cash flow and base the purchase price on the new, higher amount of cash flow.  However, when this is the case, the potential buyer is going to try to determine if it is realistic that the new cash flow will continue.  There are several key questions they will ask and analyze:

  1. Is the community’s new rents and occupancy similar to the market?
  2. Does the physical structure warrant market rate rents and occupancy?
  3. Did the community increase occupancy via Medicaid or by offering steep incentives/temporary discounts?

Ideally, a community will have a 12-month track record of consistent cash flow.  However, if a seller can clearly demonstrate what they did to fix the problem, often times we can use a short as 3 months of trailing financials.  However, the new cash flow will HAVE to continue through the marketing, due diligence and closing timeline, which could take an additional 3-6 months.

Conclusion:

If a potential buyer determines that the new, higher cash flow will realistically continue, a higher price is warranted.  However, if the new cash flow is just a cyclical event or was achieved by using Medicaid or steep discounts, it will be difficult to achieve the higher sales price and a longer track record may be required.

For more information on what your Senior Living Community might be worth, contact Jason Punzel at 630-858-2501 x 233 or punzel@slibinc.com.

www.seniorlivingbrokerage.com

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February 15, 2017
Brad Goodsell

‘Upside’ Factors That Really Matter to Senior Living Buyers?

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When considering the sale of a senior living property, it is understood that each senior living property presents its own unique opportunities and (challenges).

As such, what are some of the predominant ‘upside’ factors that matter most to perspective buyers?

At Senior Living Investment Brokerage, we help sellers take an objective approach, while also anticipating the perspective of a potential buyer.  Our approach helps to ensures a smooth transaction and that we achieve a top of the market price for your property.

SeniorCommunityWhen evaluating a property, the primary ‘upside’ factors that are of interest to a buyer are that which affect NOI, that of; staffing optimization, increasing census, increasing private pay residents, rate increases and expense management.

Secondary factors of upside that senior living buyers may consider include, is there room for expansion?  Expansion can take on a variety of approaches, both in the types of services offered (i.e.: Assisted Living, adding a Memory Care component), increasing the number of beds/units within the current building or actual construction of a new building.

Another important upside factor to consider is that of current staffing levels.  Is the property over-staffed, and are the right people assigned to the appropriate role?

Additional ‘upside’ cost savings may include economies of scale for a buyer already operating in the area, or the rebidding of food services and other vendors.  Rent increases could also be considered, depending on the current census, and historical increases of the property, while considering rates of the local market and competitors.

Conclusion:

The purchase of a senior living property is complex transaction, with many factors to consider, including that of how to best help maximize their investment in senior living, while taking into account upside factors.

Contact Information:

To discuss how we can assist you with the sale of your Senior Living Community, contact Brad Goodsell of Senior Living Investment Brokerage, Inc. at 630-858-2501 or goodsell@slibinc.com.  We are available to prepare a no obligation property valuation analysis for you.