Seniors Housing Business

OCT-NOV 2017

Seniors Housing Business is the magazine that helps you navigate the evolution of the seniors housing industry.

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www.seniorshousingbusiness.com 29 October-November 2017 n Seniors Housing Business A good time to buy skilled nursing assets? Yes and no By definition, contrarian investing is a strat- egy characterized by purchasing and selling against the prevailing sentiment of the time. Sabra Health Care REIT (NASDAQ: SBRA) fits that definition. At a time when most REITs are disposing of skilled nursing facilities, Sabra is buying them. In fact, Sabra recently merged with Care Capital Properties (CCP), creating a REIT with a total market capitalization of approximately $7.4 billion and 564 properties. Skilled nursing accounts for about 73 percent of the property portfolio. CCP was the skilled nursing portfolio spun off in 2016 by the big healthcare REIT Ventas (NYSE: VTR). But Ventas isn't the only com- pany shying away from skilled nursing. Kin- dred Healthcare, which once had as many as 300 facilities, is exiting the skilled nursing business. HCP (NYSE: HCP), a healthcare REIT, spun off its troubled HCR ManorCare portfolio in 2016. In January, Welltower (NYSE: HCN), also a health- care REIT, sold a 75 percent stake in a portfolio leased to Genesis HealthCare to Chinese investors for $930 million Skilled nursing facilities have had their problems. They are suffering from rela- tively low occupancies in part because Medicare is paying for home health rather than a nursing home. The average occupancy rate for skilled nursing properties fell 100 basis points in the second quarter to 81.7 percent, the lowest rate in the last five years, according to the National Investment Center for Seniors Housing & Care (NIC) based in Annapolis, Maryland. NIC tracks 1,500 skilled nursing properties. Despite these problems, high-quality skilled nursing facilities are still in high demand (see page 55 of the August/September issue of Seniors Housing Business). The sales price per bed for nursing care in the second quarter was $97,400, up 5.5 percent from $92,300 dur- ing the same period a year ago and a slight increase from $97,200 in the first quarter, according to NIC. Even as Sabra seeks to diversify its port- folio, Sabra CEO and President Rick Matros, who began his career on the operations side of the skilled nursing business, likes nursing homes because a growing number of seniors will need around-the-clock care. Sabra announced plans in September to acquire a 49 percent stake in the $1.62 bil- lion portfolio of Enlivant, which operates 183 senior living communities. "Skilled nursing is a core part of the health- care delivery system," Matros said in a sec- ond-quarter earnings call. "It's not going anywhere." — Jane Adler 2,100 closed transactions in excess of $19 billion, $6 billion in mortgage servicing, 29+ years debt underwriting, dedicated M&A team, loan syndications and placements, bridge loan funding, taxable and tax-exempt bonds, equity financing for new development and acquisitions proprietary sale-leaseback financing, leading HUD LEAN lender, Fannie Mae Seniors Housing Program, approved USDA lender, trading desk with 80 years of experience, balance sheet lending, focused on seniors housing and care since 1988. Lancaster Pollard is a subsidiary of ORIX USA, a division of leading international financial services group ORIX Corporation. Lancaster Pollard Mortgage Company is a Fannie Mae/GNMA/HUD-FHA/USDA approved lender. Lancaster Pollard & Co., LLC is a registered securities broker/dealer with the SEC and a member of FINRA, MSRB & SIPC. Speak with a professional today lancasterpollard.com | (866) 611-6555 Financing Progress Better Perspective, Broader Platforms We combine our sector knowledge with ORIX's financial resources to provide an even broader platform and the highest level of service for our clients. funds account for the majority of purchases today. These hungry investors need to put the money they've raised to work. There is some discrepancy between the expectations of buyers and sellers, especially among private owners who've held their properties for a long time and expect big payouts, according to brokers. The relatively large number of small deals, however, has helped to keep pricing stable. The aver- age price per unit for seniors hous- ing ranged between $165,000 and $175,000 over the last four quar- ters, ending June 30, while skilled nursing averaged about $97,000 in the second quarter. Highly prized properties are fetching eye-popping prices. North Shore Place in suburban Chicago recently sold for $700,000 per unit. Blue Moon Capital Part- ners, a private equity firm backed by public pension plans and a sovereign wealth investor, bought investor AEW's ownership posi- tion in the 156-unit assisted living and memory care building. The joint venture partner and operator is Chicago-based Senior Lifestyle Corp. Kathryn Sweeney, co-founder and managing partner at Boston- based Blue Moon Capital Partners, says that the site is entitled for 32 additional units, effectively lower- ing the purchase price to $650,000 per unit, including the cost to Rick Matros Sabra Health Care REIT

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