This private equity real estate group has grown its skilled nursing portfolio by capitalizing on market conditions and discovering attractive investment projects, subsequently maximizing investor returns through hands-on turnaround management, value-added capital improvements and superior quality of patient care.
The healthcare industry comprises nearly 20% of our nation’s gross domestic product with national healthcare expenditure at nearly $6 trillion. Demand for general healthcare services remains steady and healthcare expenditures continue to grow at a rapid pace. The U.S. Bureau of the Census estimates that by 2050, the number of Americans aged 65 and older will have doubled since 1990. By 2020, industry revenue is forecasted to rise at an average annual rate of 5.9% due to continued aging of the population and growth in personal disposable income.
The borrower was pursuing the acquisition of two skilled nursing facilities that were each losing money from operations. The two facilities were owned by two independent and unaffiliated sellers. One was a faith-based organization operating a single facility that no longer desired to operate a long-term care facility, and the other was an out-of-market owner and operator that still possessed a remaining single facility in the Northeast.
The company was convinced a turnaround was possible. However, to achieve their objective, they would need creative acquisition financing and working capital. They needed a financial services partner with extensive experience in healthcare financing—one familiar with the healthcare industry who could appreciate the potential of the management team and their business plan—and could deliver within a tight timeframe.
As the investor group performed their due diligence and entered into a purchase and sale agreement to acquire the facilities, the CapitalSource Healthcare Finance group, with over 100 years of healthcare financing experience amongst its team members, performed an in-depth analysis of the business and provided the firm with a $14.6 million senior term loan and a $1.5 million revolver. Along with the investor equity, this innovative capital structure—delivered within a tight timeframe—provided the new owners and management team with the liquidity they needed to acquire the facility and focus on operations without putting an undue burden on its balance sheet.
CASE STUDY WRITTEN: 03/15