M&M Brokers Sale of $52M Seniors Portfolio

As part of National Real Estate Investor’s Seniors Housing newsletter, here is a roundup of recent deals involving seniors housing properties.

Marcus & Millichap Real Estate Investment Services closed on the sale of a three-property seniors housing portfolio in Indiana. The properties were sold for $52 million and included the 122-unit Forest Creek Commons in Indianapolis, the 114-unit North Woods Commons in Kokomo and the 154-unit Covington Commons in Fort Wayne.

Mark Myers, a senior vice president investments in Marcus & Millichap’s Chicago office, Christopher Hyldahl, a senior associate in the firm’s West Los Angeles office, and Joshua Jandris, a seniors housing property specialist in Chicago, represented the seller, BAI of Indiana, and the buyer, Five Star Quality Care Inc. Joshua Caruana, of Marcus & Millichap’s Indianapolis office, is the firm’s broker of record in Indiana.

“These properties are institutional-quality real estate with strong existing cash flows,” Myers said in a statement. “Their acuity levels, physical makeup and locations are uniquely positioned to maximize demand and value within their respective upper-middle class markets.”

Forest Creek Commons has 56 studios, 28 one-bedroom apartments and 38 two-bedroom apartments. The assisted-living portion of the property was constructed in 1995 and an addition was built in 2006. The garden homes were constructed in phases from 1996 to 1998.

North Woods Commons features 50 studios, 42 one-bedroom units and 22 garden homes on an approximately five-acre campus. The assisted living section was constructed in 1997 and added on to in 1998. The garden homes were built in two phases in 1998 and 2005.

Covington Commons features 64 studios, 24 one-bedroom units and 48 two bedroom garden homes on an approximately 12-acre campus.

Sunrise Senior Living Enters Long-Term Management Agreement

Sunrise Senior Living Inc. and its venture partner in a portfolio of seven communities completed the previously announced purchase and sale agreement, transferring ownership of the portfolio to a new joint venture, owned approximately 68 percent by CNL Income Partners L.P., a subsidiary of CNL Lifestyle Properties Inc. and approximately 32 percent by Sunrise.

In connection with the transaction, the Sunrise transferred its interest valued at approximately $16.8 million in the previous joint venture, and its pro rata share of the loan proceeds from the new debt financing totaling $120.0 million and CNL Lifestyle Properties contributed approximately $36.0 million and its pro rata share of the loan proceeds from the new debt financing to the new venture. The financing is for seven years at an interest rate of 4.8 percent.

The average unit occupancy in the portfolio is stabilized at 87.3 percent for the six months ended June 30, 2011 at a total average daily rate of $180.78. Unit occupancy growth was up 330 basis points for the second quarter 2011 over the second quarter 2010 and net operating income for the second quarter of 2011 increased 13.6 percent over the second quarter of 2010.

Sunrise secured a 7 percent long-term management agreement with the unlimited ability to cure any performance shortfalls in the NOI threshold test starting in 2015. The joint venture agreement allows Sunrise to control the assets outright in the future through buyout rights and other provisions.

Capital Senior Living Buys Three Communities for $30M

Capital Senior Living Corp. completed the acquisition of three senior living communities for a purchase price of $30 million.

Two of these communities are in South Carolina and one is in North Carolina. The levels of care offered in the portfolio include independent living, assisted living and memory care. The three communities are financed with approximately $22 million of 10-year fixed rate debt that is non-recourse to the Company with an interest rate of 4.92 percent.

The company estimates the properties will generate $1.4 million in cash from facility operations, provide incremental earnings of $700,000 and increase annual revenue by $8.0 million. The facilities have an average occupancy of 92 percent with monthly rents of $2,900.

Capital Senior Living purchased the properties from affiliates of Pulliam Investment Co., which was represented by CLW Health Care Services Group in the transaction.

Michaels Development, LINC Housing Begin Development of Senior Apartments

The Michaels Development Co. and LINC Housing Corp. broke ground on a new mixed-used, transit-oriented affordable housing community in Oakland. Red Star Apartments, which will offer affordable one- and two-bedroom apartment homes to income-eligible seniors, is being built on the former site of the Red Star yeast factory.

“We are very grateful for the neighborhood’s support of our vision to bring much-needed affordable housing to the elderly in this city and to turn a site that is considered an environmental hazard into a viable, vibrant, housing community near transportation, shopping, and cultural amenities,” Michaels Vice President Dave Lukens said in a statement.

Michaels and LINC had to take on extensive environmental remediation of the site, which was made possible through a $1 million remediation CALReUSE program grant from the state.

Although no city funds were available for the $23 million project, the developers were able to secure $1.1 million in affordable housing program funds from the Federal Home Loan Bank of San Francisco and an additional $1.5 million in infill infrastructure grant program funds from the California Department of Housing and Community Development. Additional equity will be raised through the sale of low income housing tax credits awarded to Red Star Apartments by the California Tax Credit Allocation Committee.

Designed by KTGY Group, Red Star Apartments will feature a classic California contemporary style while respecting and complementing the surrounding neighborhood architecture. It will also incorporate many green building practices and technologies and will be a transit-oriented development, located right next to a BART station and in immediate proximity to the AC transit system and local ferries.

When construction is complete in August 2012 Red Star Apartments will feature 119 apartments, retail space, a computer center and a recreation center. Out¬door amenities will include a seating and barbeque area. Michaels Development’s sister company, Interstate Realty Management, will manage the property.

Dana Strand Senior Apartments Open in L.A.

The ROEM Corp. and La Cienega LOMOD Inc. opened the Dana Strand Senior Apartments in collaboration with the Housing Authority of the City of Los Angeles earlier this month. The deveelopment represents the third phase of the redevelopment of Dana Strand Village, the former public housing site.

The new Dana Strand, designed by KTGY Group Inc., provides 100 affordable, one-bedroom senior apartments to house seniors with annual incomes at or below 30 percent of the Los Angeles County area median income. The development is a three-story building, with 82 parking spaces. Project amenities include a computer center, a community room and energy-efficient appliances along with a wide array of resident services, including computer classes, ESL classes and resident events.

The Housing Authority of the City of Los Angeles entered into a limited partnership with Dana Strand Senior LLC to develop the community. The project was constructed using sustainable building methods and also incorporates a number of green features designed to ensure its long-term energy-efficiency and sustainability. To this end, Dana Strand is designed to USGBC's LEED Silver specification.

Dana Strand Senior Apartments was financed with 4 percent low-income housing tax credits and tax-exempt bond financing made possible by Freddie Mac Credit Enhancement Program. Dana Strand has partnered with the Citi Community Capital and the Los Angeles Housing Department for financial support on this $22.3 million. Additionally, the project was awarded 99 Project Based Section 8 vouchers through HUD.

Red Mortgage Capital Completes $19.9M Financing for Three Ohio Projects

Red Mortgage Capital LLC provided permanent financing for three assisted living senior communities in north-central Ohio utilizing FHA Section 232/223(f) mortgage insurance and Ginnie Mae Mortgage Backed Securities. The FHA insured loans paid off interim financing that related entity Red Capital Partners LLC had provided to facilitate acquisition of the properties by New York City-based Premier Senior Living LLC, a privately-owned owner/operator of seniors housing.

Three FHA LEAN loans totaling $19.9 million were funded respectively for three Ohio properties, The Inn at Fountain Park in Bryan, The Inn at Westbrook in Upper Sandusky and The Inn at Orchard Park in Bucyrus. The 35-year fully amortizing loans are non-recourse and each carries a highly attractive fixed interest rate for the term of the financing.

For the Premier transactions, although the owner originally sought permanent acquisition financing, when it became apparent that such financing would not be available in the required timeframe, Red Capital Partners bridged the timing gap and provided acquisition capital while the permanent solution was being secured. The interim bridge loan subsequently was paid off via the FHA 232/223(f) insured loans underwritten and processed by Red Mortgage Capital.

The permanent financing of the Premier projects also marks the completion of Red Capital’s first interim loans made since it previously had suspended activities under a commercial bank parent entity. A sale from that entity in mid-2010 allowed Red Capital to re-launch its principal lending activities for multifamily and seniors housing properties. Since it resumed providing bridge-to-permanent solutions in the past year, it has made eight interim loans totaling more than $80 million.

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