Senior care market sizzling as boomers drive investment rush
ORIGINALLY APPEARED IN DAYTONA BEACH NEWS-JOURNAL, 1/27/2013 by Bob Koslow
CWP’s Steven Katz Quoted In Senior Care Article
Add senior care facilities to the list of current hot commercial investment properties locally, along with apartments, discount retail and drug stores. In the last two months, at least nine senior care facilities in Volusia and Flagler counties have been purchased by new investors, most national in scope but also a local group.
Sale prices have ranged from a high of $17 million to nearly $4.5 million.
“There is a concentration in Florida of a senior housing audience with the large number of retirees. Many of the buildings are older and not many new ones are being built,” said Christina Firth, a spokeswoman for Formation Capital, an Alpharetta, Ga.-based investment firm that specializes in health care real estate and recently purchased nursing homes in Daytona Beach and Ormond Beach. “There may have been some companies that also wanted to beat the end-of-year tax liabilities.”
The recent flood gates opened in early December with Argent Properties in White Plains, N.Y. buying five senior care facilities for more than a combined $42.3 million. The Argent facilities include Oakwood Garden of DeLand, a 122-bed nursing home purchased for $6.68 million; DeBary Manor, a 12o-bed nursing home purchased for $9.6 million; and Manor on the Green, a 192-bed nursing home in Daytona Beach bought for $6.75 million. Coastal Health and Rehabilitation Center, a 120-bed center in Daytona Beach purchased for $10.25 million, and Flagler Pines, a 120-bed nursing and rehabilitation center in Bunnell bought for $9 million, were also included. Health Care REIT of Toledo, Ohio sold the five properties. The real estate investment trust paid $35.3 million in 2004 for the facilities, making a $7 million profit in eight years with the sale.
Facility residents will not see much of a change. Gulf Coast Health Care in Pensacola will continue to manage the five facilities as it had under the previous owner, said Jamey Richardson, vice president of operations for Gulf Coast Health Care. “There’s a demand out there and it’s strong, but I thought it would be the opposite with Obama care paying less,” said Claude Gardner, managing director for Prudential Commercial Real Estate FL in Daytona Beach about the reduction in Medicare and Medicaid reimbursements. ”I’m not sure why the demand (is so high). Maybe it’s the guarantee that comes with it. It might be smaller, but it’s a guarantee and investors are taking hard looks at their returns.”
Also in December, New York City-based American Realty Capital Healthcare Trust paid $17 million to Principal Senior Living for Benton Village of Palm Coast, an 80-bed independent and assisted living facility in Palm Coast that Principal Senior Living built in 2007.
BOOMERS DRIVE DEMAND
“We all know about the aging of America and as the age elongates, there will be a demand in health care, including senior housing,” said Todd Jensen, chief investment officer for American Realty Capital Healthcare Trust. “In the Daytona Beach area, there was rapid growth in the boom days and the demographics show this as a good investment.” Jensen also noted that Benton Village of Palm Coast has land on which to grow and that without many new senior care facilities having been built in recent years, occupancy rates at existing facilities have improved and should continue as millions of Baby Boomers retire.
American Realty Capital Healthcare Trust bought five of Principal Senior Living properties in a package deal, including the Palm Coast center, said Kyle Diekmann, a co-founder and partner at Principal Senior Living, which is based in Alpharetta, Ga. “The sale was a business strategy,” he said. “They are popular investments, particularly because they performed so well through the recession, outperforming apartments and shopping centers.”Principal Senior Living will continue to manage the 12-acre Palm Coast center, spokesperson Jessica Miller said.
Formation Capital also entered the local market in December. The Alpharetta, Ga. Investment management firm focused on senior housing and care purchased the Coquina Center in Ormond Beach for $11.65 million and the Bridgeview Center in Daytona Beach for $5.04 million. Both are nursing homes that were sold by GE Capital in Chicago, doing business as Diamond Senior Living II LLC. GE Capital bought the two nursing centers in 2004 for a combined $5.72 million, making almost $ll million profit on the sale. Coquina Center is licensed for 120 beds while Bridgeview Center is licensed for 139 beds.
OLD PROFIT MODEL CHANGING
Earlier this month, Paul Holub Jr. of Holub Development in Ormond Beach, sold Golden Abbey Ormond Beach for $4.475 million. Holub bought the 55-bed licensed independent and assisted living facility in 2008 for $2.37 million. The new buyer, Ormond Investors Group LLC, is managed by Port Orange residents Samuel Lavarias, Imelda Lavarias and Manuel Saldon, who state licensing records list as administrator of Golden Abbey Ormond Beach. The trio also are partners in the Golden Abbey facility on Golfview Drive in Daytona Beach.
“Volusia County has a high percentage of seniors, older then 75, and it will grow with the retiring Baby Boomers,” said physician Steven Katz, who leads the health care practice acquisition and advisory department at Charles Wayne Properties, a Daytona Beach-based commercial real estate firm. “Some companies are positioning themselves to take advantage of that.”
One reason some investors may be selling now, despite an aging population, is the decline in Medicare and Medicaid reimbursements. With shrinking profit margins, smaller and less efficient companies could be selling to larger investment companies with deeper pockets who are able to trim costs, Katz said.
“The old model is changing, and with the economy having gotten tighter, people are less willing to pay the difference (between government and insurance reimbursements and costs). So that creates more moderate priced facilities and some can’t make the change and are selling.