November 1, 2021
Three Separate Transactions for Pennsylvania Portfolio
Evans Senior Investments (ESI) successfully represented the exit from the long term care industry for a Pennsylvania owner/operator.
The portfolio consisted of three separate transactions for all eight of the seller’s communities. The combined purchase price for all three transactions was $150,000,000 or $121,000 per functional bed/unit.
The first tranche of the portfolio consisted of four communities totaling 661 licensed skilled nursing beds (632 functional beds) and 88 independent living cottage units. At the time of marketing the average census was 74% with total portfolio revenue of $48,000,000 and net operating income of $2,300,000 or a 5% net operating income margin. While under contract, census reached a low of 68% as a result of a ban on admissions from COVID-19 and a lack of elective surgeries from hospitals. The ESI team ran a selective and confidential marketing process ultimately securing a regional owner/operator looking to grow their skilled nursing presence in the state of Pennsylvania. “The ability for the skilled nursing market to acquire communities based on pro-forma valuations and obtain financing without sufficient in-place cashflow demonstrates the strength of the marketplace today'' commented Henry Fuller, Senior Associate at ESI.
The second tranche of the portfolio consisted of an entrance fee CCRC campus located in Langhorne, PA consisting of 179 skilled nursing beds, 134 independent living units, 81 personal care units, and 21 memory care units. At the time of marketing, the average census for the campus was 74% with total campus revenue of $24,800,000 and net operating income of $1,400,000 or a 5% net operating income margin. The ESI team ran a simultaneous marketing process with the entire portfolio and secured a New Jersey-based owner/operator of both skilled nursing and senior living communities.
The final transaction of the portfolio represented a standalone personal care community located in York, PA. Built in 1984 with a memory care conversion in the last 5 years, the property consisted of 84 personal care units and 16 memory care units. The community was not performing at the time of marketing as census was 70% with revenue of $4,000,000 and net operating income of -$289,000. The ESI team secured the same buyer as the first tranche who originally intended to operate the property, however, the buyer’s operating team lacked experience with operating senior living communities and ESI was able to secure a tenant for the community. An East Coast based operator emerged as the best tenant for the property and ESI was able to successfully negotiate a market lease between the two parties in less than three weeks.
ESI was successfully able to coordinate closing for all three transactions on November 1st, 2021 with two separate buyers and three different operators for the seller’s entire portfolio. Jason Stroiman, President and founder of ESI, commented “This transaction represented a strategic opportunity for both buyers to expand their footprint in Pennsylvania and showcased ESI's ability to successfully close three separate transactions with one seller across eight facilities.”
Evans Senior Investments continues to observe the difficulty of operating long term care assets in today’s marketplace with rising labor costs and the increasing need for compliance oversight. The continued crisis related to the COVID-19 pandemic will likely intensify the struggles of independent owners as the crisis strains the day to day operations at facilities nationwide. Since March 31st 2020, Evans Senior Investments has closed over $653M in transaction volume, with over $1B in transaction volume set to close in the fourth quarter of 2021.