CASE STUDIES
River's Edge Atrium
Village Merrill
Gardens Bristal
Portfolio
River's Edge
Engagement
River's Edge is a 190-unit, independent living community located adjacent to a golf course in suburban St. Louis. It is a choice facility with units averaging over 1,250 gross square feet. Just four months after the opening, the local owners made a strategic decision to sell the property. SHIA was retained to consider the various real estate investment alternatives.
River's Edge is a 190-unit, independent living community located adjacent to a golf course in suburban St. Louis. It is a choice facility with units averaging over 1,250 gross square feet. Just four months after the opening, the local owners made a strategic decision to sell the property. SHIA was retained to consider the various real estate investment alternatives.
Challenge
Because the building was still in the initial leasing phase, the client did not want current and potential residents to learn that a property sale was being considered. Compounding this issue was the HUD financing. The existing HUD 221-D-4 Retirement Service Center financing would not allow for a portion of the building to be converted to assisted living. The only option for a new owner/investor would be to retain the services of a state certified home health care agency that could have an office in the building. Furthermore, the HUD loan could not be paid-off, and a new owner would have to be HUD certified to assume the financing at an interest rate well above market.
Because the building was still in the initial leasing phase, the client did not want current and potential residents to learn that a property sale was being considered. Compounding this issue was the HUD financing. The existing HUD 221-D-4 Retirement Service Center financing would not allow for a portion of the building to be converted to assisted living. The only option for a new owner/investor would be to retain the services of a state certified home health care agency that could have an office in the building. Furthermore, the HUD loan could not be paid-off, and a new owner would have to be HUD certified to assume the financing at an interest rate well above market.
The Process
Because of the on-going lease-up process and the sensitivity of the HUD financing issue, the owner was insistent on a low-key approach to marketing. Accordingly, only an executive summary of information was prepared, and no site tours were allowed until a Letter of Intent was executed. Most significantly, the underlying cash flow required to justify a "retail" value was not in place, so it became obvious that a creative solution would need to be found.
Because of the on-going lease-up process and the sensitivity of the HUD financing issue, the owner was insistent on a low-key approach to marketing. Accordingly, only an executive summary of information was prepared, and no site tours were allowed until a Letter of Intent was executed. Most significantly, the underlying cash flow required to justify a "retail" value was not in place, so it became obvious that a creative solution would need to be found.
Outcome
After considering several acquisition proposals, the owners chose to work with a 1031 tax-deferred purchaser who had extensive seniors housing operating and marketing experience. Because the transaction was driven in part by 1031 tax advantages and not the in-place NOI, our client realized a significant price spread over what a conventional valuation would have justified. HUD responded favorably to the loan assumption, and the transaction quickly closed at $29 million.
After considering several acquisition proposals, the owners chose to work with a 1031 tax-deferred purchaser who had extensive seniors housing operating and marketing experience. Because the transaction was driven in part by 1031 tax advantages and not the in-place NOI, our client realized a significant price spread over what a conventional valuation would have justified. HUD responded favorably to the loan assumption, and the transaction quickly closed at $29 million.
Atrium Village
Engagement
The owners of a successful 260-unit independent living and assisted living facility in suburban Baltimore wanted to consider several investment alternatives. Their six year old community was consistently achieving occupancy levels in the mid ninety percent range. They needed to decide whether to refinance the existing debt with more favorable financing or to seek an entity that would acquire the asset at a value which reflected a more aggressive approach to revenue enhancement.
The owners of a successful 260-unit independent living and assisted living facility in suburban Baltimore wanted to consider several investment alternatives. Their six year old community was consistently achieving occupancy levels in the mid ninety percent range. They needed to decide whether to refinance the existing debt with more favorable financing or to seek an entity that would acquire the asset at a value which reflected a more aggressive approach to revenue enhancement.
Challenge
The owners literally gave SHIA less than a month to put on the table a viable deal for serious consideration. The month stricture was critical because the existing lender was going to shortly be able to exercise rights that would have impaired a transaction from happening for at least two years. There was no margin for error in bringing to the table the most appropriate party who could execute the transaction without any delay.
The owners literally gave SHIA less than a month to put on the table a viable deal for serious consideration. The month stricture was critical because the existing lender was going to shortly be able to exercise rights that would have impaired a transaction from happening for at least two years. There was no margin for error in bringing to the table the most appropriate party who could execute the transaction without any delay.
The Process
Because of the on-going lease-up process and the sensitivity of the HUD financing issue, the owner was insistent on a low-key approach to marketing. Accordingly, only an executive summary of information was prepared, and no site tours were allowed until a Letter of Intent was executed. Most significantly, the underlying cash flow required to justify a "retail" value was not in place, so it became obvious that a creative solution would need to be found.
Because of the on-going lease-up process and the sensitivity of the HUD financing issue, the owner was insistent on a low-key approach to marketing. Accordingly, only an executive summary of information was prepared, and no site tours were allowed until a Letter of Intent was executed. Most significantly, the underlying cash flow required to justify a "retail" value was not in place, so it became obvious that a creative solution would need to be found.
Outcome
In a mere eight weeks from start to finish, this $58 million facility was sold to one of the premier seniors housing owner/operators. New management was put in place without any disruption to residents or staff.
In a mere eight weeks from start to finish, this $58 million facility was sold to one of the premier seniors housing owner/operators. New management was put in place without any disruption to residents or staff.
Merrill Gardens
Engagement
One of North America's largest seniors housing owner/operators was looking to expand its US portfolio with a high-profile acquisition capable of accretive growth for its shareholders from day one. Their interest was to identify potential acquisition candidates with a critical mass of stabilized assets and a brand name which would complement the client's prominent US seniors housing operations. SHIA was retained on an advisory basis to identify specific entities that might consider an "off market" transaction without going through the auction process and to provide guidance in negotiations.
One of North America's largest seniors housing owner/operators was looking to expand its US portfolio with a high-profile acquisition capable of accretive growth for its shareholders from day one. Their interest was to identify potential acquisition candidates with a critical mass of stabilized assets and a brand name which would complement the client's prominent US seniors housing operations. SHIA was retained on an advisory basis to identify specific entities that might consider an "off market" transaction without going through the auction process and to provide guidance in negotiations.
Challenge
SHIA identified several possible portfolio candidates of which Merrill Gardens was one. Merrill has a stellar reputation among both consumers and the financial community. Their platform is solid and they are developing new projects primarily in the western US. SHIA suggested that the southern portion of Merrill might be an interesting investment play given the synergies of operations between the companies and the potential to integrate a portion of the non-strategic Merrill assets into the client's portfolio. It was imperative that the principals on both sides establish reasonable expectations and a significant level of trust. The numbers would have to be very aggressive for the Merrill principals to consider a transaction involving choice assets while they were still growing.
SHIA identified several possible portfolio candidates of which Merrill Gardens was one. Merrill has a stellar reputation among both consumers and the financial community. Their platform is solid and they are developing new projects primarily in the western US. SHIA suggested that the southern portion of Merrill might be an interesting investment play given the synergies of operations between the companies and the potential to integrate a portion of the non-strategic Merrill assets into the client's portfolio. It was imperative that the principals on both sides establish reasonable expectations and a significant level of trust. The numbers would have to be very aggressive for the Merrill principals to consider a transaction involving choice assets while they were still growing.
The Process
SHIA facilitated a trusting dynamic between the principals. From opening dialogue to initial documents, the process was accomplished in a matter of several months. Once the principals agreed to the terms of a transaction, the due diligence efforts commenced with a focus on the financial viability of this multi-facility acquisition. No on-site inspections were allowed until Merrill had received assurances that the deal was financeable and approved by our client's Board.
SHIA facilitated a trusting dynamic between the principals. From opening dialogue to initial documents, the process was accomplished in a matter of several months. Once the principals agreed to the terms of a transaction, the due diligence efforts commenced with a focus on the financial viability of this multi-facility acquisition. No on-site inspections were allowed until Merrill had received assurances that the deal was financeable and approved by our client's Board.
Outcome
Through everyone's good will and perseverance, this $347 million transaction of 31 choice independent living and assisted living facilities closed quickly and satisfactorily, increasing our client’s US asset base by more than 40 percent.
Through everyone's good will and perseverance, this $347 million transaction of 31 choice independent living and assisted living facilities closed quickly and satisfactorily, increasing our client’s US asset base by more than 40 percent.
Bristal Portfolio
Engagement
The owners of a highly successful seniors housing property group desired to capitalize on their accomplishments while retaining management control. The 640-unit portfolio consisted of four stabilized assets of superior quality in one of the most affluent regions of the country. A fifth facility was still under construction with a grand opening scheduled sometime during the portfolio marketing process. The portfolio included independent living, assisted living and Alzheimer's facilities.
The owners of a highly successful seniors housing property group desired to capitalize on their accomplishments while retaining management control. The 640-unit portfolio consisted of four stabilized assets of superior quality in one of the most affluent regions of the country. A fifth facility was still under construction with a grand opening scheduled sometime during the portfolio marketing process. The portfolio included independent living, assisted living and Alzheimer's facilities.
Challenge
The owners were insistent that this matter had to be kept strictly confidential and that a "typical" auction process would be unacceptable. Furthermore, their valuation expectations and desire to remain as manager suggested that this would be a logical acquisition for a platform motivated, investor entity that was seeking a dominant position in the lucrative NY metropolitan marketplace.
The owners were insistent that this matter had to be kept strictly confidential and that a "typical" auction process would be unacceptable. Furthermore, their valuation expectations and desire to remain as manager suggested that this would be a logical acquisition for a platform motivated, investor entity that was seeking a dominant position in the lucrative NY metropolitan marketplace.
The Process
The marketing process consisted of a comprehensive evaluation of each facility and the portfolio's complex bond financing structure. Once this review was completed, a secure web site and marketing prospectus was prepared. The process used by SHIA was an exclusive "BY INVITATION ONLY" approach that was targeted to a handful of savvy, institutional investors that SHIA had relationships with and perceived as being appropriate investors.
The marketing process consisted of a comprehensive evaluation of each facility and the portfolio's complex bond financing structure. Once this review was completed, a secure web site and marketing prospectus was prepared. The process used by SHIA was an exclusive "BY INVITATION ONLY" approach that was targeted to a handful of savvy, institutional investors that SHIA had relationships with and perceived as being appropriate investors.
Outcome
The owners realized values on a per unit basis which had never been realized in the industry. Through SHIA’s efforts and with the valuation and packaging skills of our prominent transaction support consultant, HealthTrust, the portfolio was under a Letter of Intent within a matter of weeks. The transaction closed at $290 million or $453,000 per unit including the fifth property which was not stabilized prior to closing. The international investor consortium that bought the portfolio retained the existing management and is continuing to enhance the Bristal brand.
The owners realized values on a per unit basis which had never been realized in the industry. Through SHIA’s efforts and with the valuation and packaging skills of our prominent transaction support consultant, HealthTrust, the portfolio was under a Letter of Intent within a matter of weeks. The transaction closed at $290 million or $453,000 per unit including the fifth property which was not stabilized prior to closing. The international investor consortium that bought the portfolio retained the existing management and is continuing to enhance the Bristal brand.