Buyer: Two-SNF Deal for Under $10M Shows Declining Bed Prices in Certain Metros

Cascade Capital Group snapped up a pair of skilled nursing facilities in the Chicago metropolitan area for less than $10 million — a deal that its leaders say indicates a downward per-bed pricing trend both locally and nationally.

With 230 beds, the portfolio — consisting of Avantara of Elgin in Elgin, Ill. and The Grove of St. Charles in St. Charles, Ill. — sold for under $50,000 per bed, the Skokie, Ill.-based private investment firm disclosed. Now under the management of affiliated operator Legacy Healthcare, the buildings were previously operated by separate non-profit health systems.

“Buying these facilities at a great value, under $50,000 per bed, will allow us and our operator to invest the necessary capital to help restore these facilities, both aesthetically and operationally,” Cascade vice president of acquisitions Yitzy Rosenblum said in a statement announcing the deal.

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While he couldn’t put an exact figure on the average price in the Chicagoland market, Cascade general counsel Mordy Kaplan said prices in the $100,000-per-bed range are “unicorns” in the Windy City and other markets where Cascade is exploring deals.

“I don’t know if I’ve seen much of a decline in the New York market, because it’s still pretty strong — with the exception of select pockets within those markets — but there are some pretty big metro markets that are seeing a decline in pricing,” Kaplan said.

The most recent data set from the National Investment Center for Seniors Housing & Care (NIC) showed a 12.1% drop in per-bed pricing between the second quarters of 2017 and 2018, when the figure fell from $95,800 to $84,200. Real estate advisory firm Marcus & Millichap was a little more optimistic, pegging the trailing four-quarter average price at $92,500 per bed, up about 75% from the end of the last decade.

Legacy currently operates more than 30 facilities owned by Cascade, which is on an expansion push in the region: The firm currently has over $200 million of assets under contract.

Cascade arranged the deal with financing from CIBC Bank USA.

“We have had the privilege of working with the Cascade and Legacy teams for many years and are confident in their ability to continue to create transformational facilities that provide a high standard of care for the residents while achieving financial success,” CIBC managing director Michael Monticello said in a statement announcing the deal.

Written by Alex Spanko

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