BRENTWOOD, TENN. — Brookdale Senior Living Inc., a Brentwood-based senior living owner and operating firm, has acquired nine seniors housing communities for $121.3 million. The properties include a total of 1,295 units.
Brookdale previously operated the nine properties under long-term leases. At the request of the seller, the names and locations of the properties were not disclosed.
The transaction comes at a time when there is uncertainty in the seniors housing market due to the Centers for Medicare & Medicaid Services (CMS) ruling to cut hospital reimbursements by 11 percent, or $3.87 billion, in fiscal year 2012, which began Oct. 1, 2011. Although the ruling may have bridled sales of seniors housing in the short term, the long-term demand for these facilities is expected to grow.
According to Marcus & Millichap’s most recent market report on seniors housing, persons age 65 and older makes up 13 percent of the U.S. population. During the next 10 years, that age cohort is estimated to reach 17 percent of the general U.S. population.
Brookdale’s acquisition fulfills a stance made in the Marcus & Millichap report, which stated, “Uncertainty surrounding the Medicare ruling will temper sales velocity … but trading will persist as regional operators build on cost efficiencies achieved through large, multi-property acquisitions.”
Brookdale is making strides toward improving cost efficiencies by renovating the communities to improve the real estate fundamentals, which will go toward improving the cash flow from rental rates.
“Acquiring these communities gives us the opportunity to move forward with renovating and repositioning these assets to improve their financial performance,” said Bill Sheriff, CEO of Brookdale, in a prepared statement.
The acquisition was financed with a $77.9 million, 10-year mortgage secured by seven of the properties, in addition to a $15 million seller-financed loan secured by the other two properties.
Additionally, Brookdale obtained a $63 million loan secured by one of the properties. Brookdale paid off a $62.8 million first mortgage loan, which was scheduled to mature in 2013.
Brookdale is in an advantageous position of owning the properties, as opposed to leasing, because of the freedom to either maintain a performing property or to dispose of the property.
“By owning these assets outright, we will capture the assets’ entire value creation potential and preserve important (options) with respect to these assets,” said Sheriff.
Brookdale’s portfolio includes 646 communities in 36 states, serving approximately 67,000 residents. Brookdale’s stock price closed at $18.74 per share on Tuesday, down from $23.81 a year ago.
— John Nelson