09-28-2005, 09:37 AM
| | Sale Manageback Finance Stuctures to accomodate Senior Housing Owners
The mid-sized long term care companies and senior housing chains (i.e.
owning at least five properties) have accessed a financing vehicle that has
emerged over recent years---- as an alternative or supplement to traditional sale
The vehicle serves to redeploy the capital from asset sales into new
development projects or put into various strategic acquisitions, without incurring
the rigidities attendant to a formal leasing structure.
The format is provided through a Sale Manageback, viz. a financing
structure whereby the LTC or senior housing group sells the property to an inst
itution (e.g. through larger private equity groups or pension funds) and then
simultaneously takes back a long term management contract on the property which
it has sold to the institution..
That is, the LTC group sells the property but retains a long-term operating
The basic premise is that the "freed up" capital can better be used in the
central operating business rather than in being diverted into the ownership of
real estate---- all the while retaIning a management role, but not assuming
any lease obligations.
(A premise which can sometimes be challenged.)
It is not uncommon for knowledgeable borrowers to "carve out" or structure a
continuing minor participation in the cash flows----- to align interests and
to motivate the LTC group to perform well, but this is a matter of
The ideal borrowers are characterized by the following :
* Borrowers are highly experienced in the long term care or senior housing
* Minimum of five owned properties.
* A successful historical performance
* Sized at $25 million to $250 million.
If you wish to investigate the structure, please call Mr. Margolin of
Chilmark Associates Inc. at 203-353-0897.
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