Built in 1974, the community was placed into receivership in June 2019 after the current borrower, a local non-profit organization, defaulted on their existing HUD loan. At the time of the sale, the property was 77% occupied and was losing over $500,000 a year in net operating income. Contributing to the below average performance was the abundant amount of contracted staff at the community, which the new operator plans to replace with full time employees, as well as poor expense management. The facility was also the recent beneficiary of a substantial Medicaid rate increase.

“The facility was set to receive Medicaid rate increases on 5/1/2020 and 7/1/2020 per previous legislative approval, but recently was granted a $24.00 per day emergency funding rate as a part of the COVID-19 crisis, which will be retroactive to 2/1/20. These Medicaid rate increases will dramatically help improve the cash flow of the facility in the very near future and serve as a bridge through these troubled times,” commented Henry Fuller, Senior Associate at ESI.

ESI represented the seller, the court appointed receiver for the community. Jeremy Stroiman, CEO of ESI, commented “Washington Care Services presented a great opportunity for a new ownership group with operational expertise and synergies in the skilled nursing market to stabilize occupancy and improve upon the expense structure as this community is folded into their portfolio. Although the non-profit operator was unable to make the finances at the facility work in their favor, the transition to a larger operator should help the residents and employees at the community to be better cared for in the future with a better capitalized owner.”

Evans Senior Investments continues to observe the difficulty of operating a standalone skilled nursing facility, especially for non-profit groups, in today’s marketplace with rising labor costs and the increasing need for compliance oversight related to PDPM and the expansion of Managed Care networks. The continued crisis related to the COVID-19 pandemic will likely only intensify the struggles of independent owners as the crisis strains the day to day operations at facilities nationwide.

The buyer was an East Coast capital group that formed a joint-venture with a Los Angeles based operator. The community represented one of two facilities they closed on in the State of Washington simultaneously. Evans Senior Investments executed a letter of intent from the ultimate buyer of this deal 20 days after taking it to market. Despite the recent COVID-19 pandemic, the acquisition market appears to continue to be very strong with regional operators actively pursuing all dealflow. ESI has advised clients on over $110 million in transaction deal volume for senior care facilities in the state of Washington.