ESI Handles 21-Building Exit for Skilled Nursing Operator with $86M Price Tag

Evans Senior Investments this week announced the successful completion of an $86 million deal that saw a Midwestern nursing home owner-operator offload 21 facilities across three distinct portfolios.

The unnamed seller was looking for an exit from the long-term care space, according to a release from the Chicago-based ESI, which marketed the buildings in three separate transactions — one each for facilities in the owner-operator’s markets of Indiana, Iowa, and Illinois.

Across the three deals, the final price came in at about $54,000 per functional bed, ESI disclosed.

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The Indiana portfolio had run into familiar issues during the COVID-19 pandemic, seeing census drop from 78% to 66% over the sale process amid admission bans and declines in elective surgeries at local hospitals. A regional owner-operator with designs on expanding in the Hoosier State ended up as the buyer of the 11 buildings, which feature 751 licensed beds and 109 senior living units.

“The buyer plans to utilize their existing presence in the state to increase the Medicaid rate within the communities,” ESI senior associate Henry Fuller said in a statement announcing the deal. “The increased Medicaid income will result in an additional $1 million in revenue without changing census.” 

Revenue at the start of the marketing process was $47 million across the 11 buildings, according to ESI.

The Indiana buyer also purchased the seven-building Iowa portfolio, but engaged ESI to find an operating tenant; a regional player with recent experience in Iowa takeovers eventually signed a market lease on the facilities.

Census at the Iowa buildings slipped from 75% to 68% during the course of marketing, with outbreaks at the facilities and new-admission declines as primary drivers of the declines. The portfolio — which includes 512 licensed beds and 75 senior living units — generated revenue of $29.7 million as of the start of the sale process.

Finally, the Illinois portfolio went to a separate regional owner — but not before the Indiana/Iowa buyer initially expressed interest before bowing out of the process.

“Midway through the transaction the buyer hired ESI to sell the Illinois portfolio,” the brokerage noted. “The current operating environment and lack of cash flow proved to be too difficult for the buyer to purchase.”

Two of the three properties in the Illinois group were losing money prior to debt service, according to ESI; the total portfolio spans licensed 293 beds and generated about $13 million in revenue.

The eventual Illinois-based buyer installed three separate operators at the properties.

All three transactions closed November 12.

“This transaction represented a strategic opportunity for both buyers to expand their footprint in each state and showcased ESI’s ability to successfully close three separate transactions for the seller’s 21 facilities,” ESI president and founder Jason Stroiman said in the statement.

ESI has closed 13 deals — with a total price tag of more than $235 million — since the start of the COVID-19 pandemic, with seven more slated for completion before the end of the year.

“The continued demand for skilled nursing communities across the country comes from lack of new development, federal financial support since the pandemic began, and a continued divide between independent and large regional operators,” the brokerage observed.

While large skilled nursing portfolio deals have generally slowed given the strains of the pandemic, ESI’s 21-building transaction came shortly after Eagle Arc Partners — the investment firm formerly known as BM Eagle Holdings — announced the purchase of 20 skilled nursing facilities.

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