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Senior Housing > Blog > 2014 > June

NEW CONCEPT FOR ASSISTED LIVING, INDEPENDENT LIVING, SKILLED NURSING & COMMUNITY CARE RETIREMENT COMMUNITIES

The current Baby Boomer generation reaching retirement feels younger, will live longer and demands meaningful activities and experiences in a Retirement Home as they leave their careers and active social life behind them. They are still healthy, but their physical stamina has changed and requires some assistance or service. There are currently 78 million Baby Boomers in the U.S. and 8000 turn 65 everyday. They expect better housing and amenities in their first entry into an Assisted Living or Independent Living facility, even though eventually they require the same medical care & services as generations before them.

ASSISTED LIVING, INDEPENDENT LIVING, SKILLED NURSING FACILITIES MEET BABY BOOMERS DEMAND

Owner/operators must meet the demands of this “back to the dorm” crowd and compete for their considerable buying power. Not only do they need to invest in technologies that insure life safety but also in technologies that insure life quality.  These new technologies will emphasize life style and wellness. Owner/operators must adapt also to the current aging generation’s demand for diversity.  When first entering retirement the Boomer generation does not want to co-mingle with just Seniors.  They prefer to live in a community of diverse ages, allowing them to co-mingle with all ages:  youth, middle age, and older. To meet this demand, Community Care Retirement Community Developers are building their Independent Living Facilities and 55+ communities close to developments, which incorporate all ages.

Whether building a new community or adding to an established one, retirement facilities feature

  •         Neighborhoods for 55 plus
  •         Neighborhoods for single families within blocks
  •         Apartment complexes in another sector
  •         Community areas for all ages  (Parks, stores, recreation areas etc.)

Assisted Living and Skilled Nursing facilities are often found in the neighboring location completing the Continuing Care Retirement Community concept.

RESTRUCTURING OF BANKRUPT FACILITIES TO MEET THE NEW “BOOMER” DEMAND

Purchasing a troubled facility that has declared Bankruptcy in Chapter 11 creates an opportunity for the owner to restructure the facility to meet the new demands of the culture and the demands of the emerging Boomer generation. Improving the physical plant, adding amenities, services and new technology must be addressed in the restructure with emphasis on life style and wellness.

For counsel, acquisition or disposition of a Healthcare Facility you please contact Shep Roylance of JCH Consulting Group and Roylance Senior Housing, whose expertise and knowledge will guide you through a successful transaction in or out of Bankruptcy.

Shep Roylance –  Roylance Senior Housing, JCH Consulting Group    
Direct 805-633-4649      Cell 818 515-0530         Fax 805 392-5171       Email Shepshep@shepjch.cch

COUNTRY VILLA – RARE OVERBID OPPORTUNITY FOR ACQUIRING 18 PRIME LOCATION CALIFORNIA SKILLED NURSING FACILITIES AND 1 ASSISTING LIVING FACILITY OUT OF CHAPTER 11 BANKRUPTCY

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An auction sale is scheduled to be held on July 28, 2014 for a sale of 18 prime location skilled nursing facilities and 1 assisted living facility all located in Southern California containing a total of 1,905 of licensed beds.

7 of the skilled nursing facilities are being made available with new leases with an initial lease term of 15 years followed by three, five-year options and a fourth, four-year option (for a total of 34 years) with below market starting annual rent of $4,135,585 for 687 beds or approximately $502 per bed.

The addresses for these 7 facilities and the number of licensed beds for each of the facilities are as follows:

Country Villa Bay Vista (5901 Downey Avenue, Long Beach, CA 90805 – 70 licensed beds)

Country Villa East (2415 S. Western Avenue, Los Angeles, CA 90018 – 99 licensed beds)

Country Villa Mar Vista (3966 Marcasel Avenue, Los Angeles, CA 90066 – 68 licensed beds)

Country Villa North (3233 W. Pico Blvd., Los Angeles, CA 90019 – 99 licensed beds)

Country Villa Rehab (340 S. Alvarado Street, Los Angeles, CA 90057 – 177 licensed beds)

Country Villa Westwood (12121 Santa Monica Blvd., Los Angeles, CA 90025 – 93 licensed beds)

Country Villa Wilshire (855 N. Fairfax Avenue, Los Angeles, 90046 – 81 licensed beds)

The addresses and remaining lease terms (inclusive of options) and the number of licensed beds for each of the other 12 facilities are as follows:

Country Villa Bella Vista (933 E. Deodar St., Ontario, CA 91764) – (2023 – approximately 9 years left – 59 licensed beds)
North Point Health and Wellness Center (668 E. Bullard Avenue, Fresno, CA 93710) – (2036 – approximately 22 years left – 99 licensed beds)
Country Villa Los Feliz (3002 Rowena Avenue, Los Angeles, CA 90039) – (2016 – approximately 2 years left – 131 licensed beds)
Country Villa Pavillion (5916 W. Pico Blvd., Los Angeles, CA 90035) – (2036 – approximately 22 years left – 59 licensed beds)
Country Villa Terrace (6070 W. Pico Blvd., Los Angeles, CA 90035) – (2036 – approximately 22 years left – 49 licensed beds)
Country Villa Terrace Assisted Living Center (6050 W. Pico Blvd., Los Angeles, CA 90035) – (2036 – approximately 22 years left – 136 licensed beds)
Country Villa Plaza (1209 Hemlock Way, Santa Ana, CA 92707) – (2031 – approximately 17 years left – 145 licensed beds)
Country Villa Sheraton (9655 Sepulveda Blvd., North Hills, CA 91343) – (2031 – approximately 17 years left – 138 licensed beds)
Country Villa South (3515 Overland Avenue, Los Angeles, CA 90034) – (2027 – approximately 13 years left – 87 licensed beds)
Country Villa Belmont Heights (1730 Grand Avenue, Long Beach, CA 90804) – (2018 – approximately 4 years left – 117 licensed beds)
Country Villa Claremont (590 S. Indian Hill Blvd., Claremont, CA 91711) – (2027 – approximately 13 years left & includes a favorable purchase option of the underlying real estate – 99 licensed beds)
Country Villa Hacienda (1311 E. Date Street, San Bernardino, CA 92404) – (2021 – approximately 7 years left – 99 licensed beds)
The primary terms of the stalking horse bid are as follows:

Purchase Price – $62 million (inclusive of all accounts receivable which are estimated at approximately $27 million)

Key Money – $2 million to the landlords of the 7 new long-term leases

Employee Performance Payments to 5 Key Members of Management – $1 million

Replacement Loans to two of the facilities related to the 7 new long-term leases – replace the existing first trust deed loans to Country Villa Wilshire (in the amount of approximately $4,128,000) and to Country Villa North (in the amount of approximately $4,872,000) with new first trust deed loans in the same amount with (i) interest at a market based variable interest rate with a start rate of 5.25% per annum and adjusted annually to the then current one-year LIBOR rate (currently, 0.54%) plus 4.71% (up to a maximum interest rate of 8.0% per annum), (ii) have a term of five years, and (iii) have monthly payments computed based upon a twenty-five year amortization. Alternatively, an overbidder can increase the initial annual rent for the 7 new long-term leases by a total of $250,000

Auction Sale and Overbidding Procedures – The auction sale will be held on July 28, 2014. The breakup fee/expense reimbursement that will be owing to the stalking horse bidder in the event of a successful overbid will not be considered in determining the highest and best bid – which means that the bidding will be on a level playing field and the staking horse bidder will not be receiving any bidding advantage as a result of its breakup fee/expense reimbursement. To be qualified to participate at the Auction, within five business days prior to the auction, an overbidder (which includes any group of overbidders working together as one bidder) must do the following: (i) demonstrate that the overbidder has available to it $72 million of cash (or any higher amount that is bid by the overbidder at the auction) which is not subject to any financing contingency; (ii) deposit cash in the amount of $40 million into a trust account (which is the same deposit that the stalking horse is required to provide); (iii) submit an initial overbid which contains the same terms as described above but increases the $62 million purchase price by at least $2 million to a minimum initial overbid of at least $64 million; and (iv) any overbid must be void of any financing or due diligence contingencies. Any overbids after the initial bid at the auction must be higher than the then existing lead overbid in increments of not less than $250,000.

Interim Management Agreement – After the bankruptcy court has approved the winning bidder at the auction, the winning bidder shall have the right if it wants to enter into an industry standard interim management agreement for the facilities to take over immediate management of the facilities pending the closing of the transaction.

If you are interested in learning more about this unique opportunity, please contact Shep Roylance of JCH Consulting Group who is serving as the sales agent and whose contact information is below. Also below is the contact information for Country Villa’s bankruptcy counsel Ron Bender of Levene, Neale, Bender, Yoo & Brill L.L.P. and contact information for bankruptcy counsel to the Official Committee of Unsecured Creditors Hamid Rafatjoo of Venable LLP.

After executing a standard NDA, you will be provided access to the data room which contains the following: (1) the signed term sheet with the stalking horse bidder which lays out the entire structure of the transaction against which you will be overbidding; (2) the form of lease for the 7 new long-term leases; (3) copies of all existing real property leases for the 12 facilities; (4) financial information relating to the operating performance of all 19 facilities in 2012, 2013 and 2014 (to date); (5) information regarding the current outstanding accounts receivable; (6) a copy of the form of MOTA to be used; (7) a copy of the email from counsel to the Los Feliz landlord indicating the financial terms the Los Feliz landlord is looking for to provide an extension of the Los Feliz lease; and (8) a copy of the email and attachments from counsel to the Belmont landlord indicating what the Belmont landlord is looking for to provide an extension of the Belmont lease.

Shep Roylance
SVP | JCH Consulting Group
Senior Housing & Skilled Nursing Brokerage
Direct 805.633.4649 | Mobile 818.515.0530 | eFax 805.392.5171
shep@shepjch.com | www.shepjch.com | BRE: 1378282

Ron Bender, Esq.
Levene, Neale, Bender, Yoo & Brill L.L.P.
10250 Constellation Blvd. | Suite 1700 | Los Angeles, CA 90067
Phone 310.229.1234 | Direct 310.229.3330 | Cell 310.261.0215 |
Fax 310.229.1244
rb@lnbyb.com | www.lnbyb.com

Hamid R. Rafatjoo, Esq. | Venable LLP
t 310.229.9900 | f 310.229.9901
2049 Century Park East, Suite 2100, Los Angeles, CA 90067
HRafatjoo@Venable.com | www.Venable.com

RFCE Reform Act 2014 Part 2

Senior Housing for Sale

Throughout March and April 2014, the bills that comprise the RCFE Reform Act were heard for the first time by legislative committees. The bills in the act are designed to protect the health, safety, and security of the Residential Care Facilities for the Elderly (RCFE). There are twelve bills within the act, and if passed, will cause a serious, direct impact in the RCFE community in California and a potentially far reaching impact on neighboring states such as Oregon, Nevada, Arizona and even Washington, Idaho, Colorado. Over time, this could ripple all the way down to Texas and to the east coast in Florida. The accompaniment bills are as follows:

AB 2236 (Stone and Mainschein) Increased Penalties for Violations

Currently, the maximum penalty for violation of RCFE laws and regulations in California is $150, even if the violation results in the death of a resident. AB 2236 would give new, stiffer minimum and maximum penalties, allocating fifty percent of all revenue gathered from these civil penalties to go toward an emergency fund for the relocation of residents in the instances of revoked or suspended licenses.

AB 1554 (Skinner) Responding to Consumer Complaints

Until now, the CCL did not have an effective method of investigating complaints filed by residents of RCFEs. AB1554 would require California’s CCL to investigate complaints in a timely fashion and provide written notice of the investigation and findings.

AB 1571 (Eggman) Consumer Information System

AB 1571 would require the DSS and CCL to set up an online information system listing accurate, updated information about many issues.

  • Licenses
  • Ownership
  • Surveys
  • Complaints
  • Enforcement information

If passed, this bill must be implemented by 2019. Also, owners of RCFEs would have to disclose any previous ownership of a similar facility in California and other states such as Oregon, Idaho, and Utah. A history of non-compliance or compliance will also be recorded on the online information system.

AB 1572 (Eggman) Resident & Family Councils

Currently, resident care facilities for the elderly in California have no obligation to inform residents and their families or representatives of their right to form a Resident or Family Council. If the bill is passed, potential buyers of residential care homes currently for sale in California will be required to inform residents and family members of their right to form councils and peer support groups.

AB 1523 (Atkins) RCFE Liability Insurance

If passed, AB 1523 will require all RCFEs in California to obtain and maintain liability insurance as a condition to licensure. This would set precedence for other states such as Texas and Florida.

What This Means for You

Overall, these changes are necessary and a step in the right direction for RCFE reform. Unfortunately, many facilities may be forced to sell their residential care facility due to inadequate funds to cover new fees and penalties incurred. For more information about how these bills may affect you in your state, please talk to an informed brokerage who is knowledgable in the healthcare industry and is dedicated to the well being of the Senior population.