July 28, 2016
Grant Kief

Residential Care Facility Sale

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Residential Care Facility Sale by Patrick Byrne

Patrick Byrne of Senior Living Investment Brokerage, Inc. recently facilitated a Residential Care Facility sale in Missouri. Cedars of Liberty is a converted school originally constructed in 1962, licensed for RCF-II. This licensure is effectively low-acuity assisted living, often carried by older buildings which do not meet current ALF standards. Many RCFs also service more of a mental health population, and that’s true of Cedars of Liberty. Years ago we toured this campus when it was a struggling, geriatric focused building with some mental health and we encouraged them to fully embrace that mental health model. Despite being in a major metropolitan market the facility was quite rural and with amenities like a basketball court & many common areas, the facility was uniquely equipped to care for a younger population. Given the low margin in this business, many smaller mental health facilities in the state were closing, leading to a steady increase in Cedars’ population.

While the facility is very large, 129,658 square feet with a capacity of 206 beds, the functional capacity of the license is only 130 beds. As such, the census at the time of marketing was above 90%. The buyer plans to expand the capacity and enhance the physical plant; whereas the seller lacked the capital to justify further investment. In the prior fiscal period the facility barely made $200k in EBITDA so the improvement was recent and combined with the aging physical plant and unique focus, attributed to a higher capitalization rate.

The Seller was a local family who had inherited the operations from their parents. The Buyer is a growing skilled operator and one of the largest mental health operators in the Midwest. The census at the time of sale was 57% and the Residential Care Facility sale was at a 13.94% capitalization rate and a 1.26X GIM.

Contact SLIB

Patrick Byrne of Senior Living Investment Brokerage, Inc. handled this Residential Care Facility sale. For additional information on this transaction or on how Pat can assist you with a purchase or sale, please contact Patrick Byrne at byrne@slibinc.com or 314/961-0070