Commercial real estate brokerage Healthcare Realty Brokerage, headquartered in Clayton, Mo., recently represented a Midwest regional operator to lease the company’s Kentucky skilled nursing facility to Advocat Inc., a publicly traded skilled nursing provider based in Brentwood, Tenn.
The lease for Arbor Place of Clinton has an initial 10-year term with two five-year renewal options, and contains an option to purchase the property for $3.3 million during the first five years, upon stabilization (the facility is currently empty).
Arbor Place was built in 1968 and got an addition in 1981, bringing it to more than 34,000 square feet. The facility has 49 resident rooms with a total of 98 licensed beds, comprised of 88 “Nursing Facility” beds and 10 “Personal Care” beds. The seller purchased and re-opened the nursing home in 2008, after the facility lost its licensing and was shut down by the state.
By 2010, Arbor Place had reached a stabilized occupancy of 90% and generated annual EBITDAR of $826,336, on revenues of nearly $5.4 million, for a 15.4% operating margin. However, in April 2011, the facility lost its Medicaid/Medicare certifications again. Its license and certificate of need remained intact, though, as local licensing and regulatory officials saw the need for skilled nursing services in the community, and worked with associated parties to expedite the facility’s reopening under new management.
The Clinton property has a HUD-insured mortgage, and Healthcare Realty Brokerage worked with HUD’s Section 232 Special Assets team to structure a lease-purchase agreement. The property owner’s ongoing debt obligations are effectively covered by Advocat’s rent obligations in accordance with the HUD-approved lease, and the new operator has time to reopen and stabilize the facility’s operations prior to executing the purchase option.
Written by Alyssa Gerace