Industry Insights

Long-Term Care M&A Sets Record in 2013

March 2014
Author:  Austin Propst

Austin Propst

Director

Corporate Finance

Health Care

910 E. St. Louis Street, Suite 200
P.O. Box 1190
Springfield, MO 65801-1190 (65806)

Springfield
417.865.8701

The long-term care (LTC) merger & acquisition (M&A) market continued to surge in 2013, closing out the year with 223* transactions—an 18 percent increase in deal volume from 2012. Transaction dollar volume increased by 17 percent to $10.7 billion, accounting for approximately 21 percent of all health care service-related transactions. The fourth quarter alone saw a record 65 LTC transactions announced, generating approximately $3.7 billion in transaction value. In the past two years, the LTC market has seen an increased number of buyers, as well as smaller transactions, with the average deal size in 2013 at approximately 50 percent of what it was in 2011. 

* Preliminary transaction count. Final count may increase. 

Typically, the first few months of the year are slower in volume following the barrage of transactions at the end of the year. However, this year started abnormally strong, with nearly 20 transactions already out of the gate through the first month of the year. Heavy deal volume continues to be driven by multiple factors, including regulatory changes, reimbursement pressures, shifting demographics and favorable interest rates. As a result, 2014 is expected to be another strong year.

As the following graphs illustrate, transactions in 2013 grew 18 percent over the previous year, with Q4 2013 closing the year with 65 transactions, growing 8.3 percent over Q4 2012.

Source:  Irving Levin Associates, Inc.

Public Comparables

Skilled Nursing

Assisted/Independent Living

Note:  LTM = Last 12 Months; EV = Enterprise Value; EBITDAR = Earnings Before Interest, Taxes, Depreciation, Amortization and Rent

Recent Select Transactions
Skilled Nursing

  • December 2013 – A private company based in Missouri purchased a 75-bed skilled nursing facility (SNF) in Illinois for $4.3 million, or $57,300 per bed. Revenues and EBITDA were $5.2 million and $660,000, respectively. The occupancy rate was approximately 90 percent. 
  • December 2013 – An investor purchased a 128-bed SNF in Indiana for $13 million, or $101,500 per bed. Revenues and EBITDA were $9.2 million and $1.8 million, respectively. The occupancy rate was 84 percent. 
  • December 2013 – FNR Healthcare purchased a 128-unit SNF in Illinois for $13 million, or $101,600 per unit. The private pay census is 43 percent, and the Medicare census is 37 percent.
  • November 2013 – An investor purchased two SNFs in Texas with a combined 230 beds for $10 million, or about $43,500 per bed. Revenues and EBITDA based on the first seven months of 2013, annualized, were approximately $10.2 million and $1.1 million, respectively. Overall occupancy for the facilities was 70 percent, hampered by some renovations this year at one of the properties. 
  • November 2013 – American Realty Capital purchased a 120-bed SNF in Texas for $12.3 million, or $102,100 per bed. The facility was built in 2012 and opened in December of that year. At the time of closing, the occupancy rate was 70 percent but is expected to be 90 percent by March 2014. 
  • October 2013 – A large regional operator purchased a 55-bed SNF and a 40-bed residential care facility in Kansas for $3.3 million, or $34,200 per bed. Revenues and EBITDA were $4 million and $325,000, respectively. The occupancy rate was 95 percent. 

Assisted/Independent Living

  • December 2013 – Capital Senior Living purchased four communities totaling 388 units for $64.9 million, or $167,600 per unit. Three of the communities are in Indiana, and one is in South Carolina. The combined occupancy rate is 95 percent. Revenues and estimated EBITDA were $14.7 million and $5.8 million, respectively. 
  • December 2013 – American Realty Capital Healthcare Trust purchased a 184-unit retirement community in Texas for $71.3 million, or $387,200 per unit. The occupancy rate is 98 percent. Revenues and EBITDA were $10.9 million and $4.8 million, respectively. 
  • December 2013 – NorthStar Healthcare Income, Inc. purchased a 125-unit independent living community in Ohio for $15.6 million, or $124,800 per unit. The occupancy rate is less than 70 percent. Revenues and EBITDA were $2.7 million and $550,000, respectively. 
  • November 2013 – American Realty Capital Healthcare Trust purchased a 97-unit assisted living community in Ohio for $22.5 million, or $231,900 per unit. The occupancy rate was 97 percent. Revenues and EBITDA were $5 million and $1.8 million, respectively.
  • November 2013 – Fortress Investment Group purchased a 121-unit independent living community in Virginia for $13.3 million, or $110,100 per unit. Revenues and EBITDA were $2.9 million and $1 million, respectively. The community was built in 1987.
  • November 2013 – Senior Housing Properties Trust purchased a 60-unit assisted living community in Tennessee for $9.9 million, or $165,000 per unit. The community consisted of two buildings—one with 20 memory care units and one with 40 assisted living units. The occupancy rate was 100 percent with a waiting list.
  • October 2013 – TrustCare purchased a 36-unit assisted living community in Colorado for $1.8 million, or $50,300 per unit. The occupancy rate is 100 percent. The facility was built in 1985 and participates in the Program of All-inclusive Care for the Elderly (PACE) program.
  • October 2013 – An affiliate of NorthStar Realty Finance purchased a 48-unit assisted living community in Kansas for $7 million, or $145,800 per unit.  The occupancy rate is 100 percent.  Revenues and EBITDA are $1.9 million and $675,000, respectively.

Source:  Irving Levin Associates, Inc.

For more information on this market update or related matters, please consult your BKD advisor.

About BKD Corporate Finance, LLC
BKD Corporate Finance, LLC, a wholly owned subsidiary of BKD, LLP, provides merger and acquisition, sales, management buyout, ESOP, recapitalization and financing advisory services. Our experience covers a variety of industries, including health care, financial institutions, communications, defense, food processing, manufacturing, retail, software, technology, transportation and distribution. Member FINRA and SIPC.

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