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The Cottages of Sun Valley are two new senior care facilities to be constructed and operated by The Cottages in Hailey, Idaho. An owner/operator management company with 15+ years experience, seeks $4.2MM for construction and $200K for operating capital during lease-up for a total of $4.4MM for the project.
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Executive Summary – Mar 2014
The Cottages of Sun Valley LLC Executive Summary -
The Cottages of Sun Valley are two new senior care facilities to be constructed and operated by The Cottages LLC at 150 N. 1st Ave (Lot 2, Block 1, Northridge VIII) in Hailey, Idaho. The Cottages, an owner/operator management company with 15+ years experience, seeks $4.2MM for construction and $200K for operating capital during lease-up for a total of $4.4MM for the project.
The project consists of building two (2) separate 16-unit single-story home-like 11,400 sq. ft. buildings -- each of the combined 32 units is intended for single occupancy (unit sizes range from 312-425 sq. ft.). One building will be dedicated to assisted living residents, the other to memory care.
The land at 150 N. 1st Ave is owned and of significant value (~$1.25MM); and $125,000 has been invested in soft costs (including site plans, drawings, engineering) to secure building permits with the city. The demand for private pay senior resident care in Blaine County is strong and competition exists only at the low-end of care facilities. The lease-up period (or time to fill-up) is anticipated to take 8 months due to pent up demand and local community enthusiasm. Market surveys and recent inquiries confirm our ability to charge premium rates at our private pay senior care facilities ($3800) especially memory care services ($4500).
At stabilization we forecast The Cottages of Sun Valley to have an annual NOI of $525k. Long-term demographics, the economics of senior care facilities prices rising faster than labor costs and a strong focus on quality private pay senior care are all factors that should strengthen those assumptions. Upon six months stabilized occupancy of the facilities The Cottages will seek a refinance with FHA, HUD or other lender. Further opportunities exist for refinancing or sale after 3 years of stabilized operations.
The Cottages and management team have 20+ years experience developing, operating and managing senior care facilities. Garold Maxfield, the CEO and his team own and manage 16 facilities with 243 senior care beds in ID, TX and MO. In addition, The Cottages has management contracts to provide administrative services to over 10 facilities and 157 senior care beds in WA, MT and ID.
The Cottages seeks to mitigate risks in the construction in a number of ways: we utilize a similar building footprint and facility plans; we refine building drawings for local specifications and site planning requirements; we use the same General Contractor – Alta Construction – past building experience with plans and currently have collaborative construction and oversight project management. The lease-up risk is also reduced by the smaller facility sizes (faster to breakeven) and by the inclusion of two local community members as shareholders and advocates for the project.
The ownership consists of 4 individuals – Garold Maxfield 25% (operator & PG), Justin Yarmark 12.5% (operator & cash investor), Anita Northwood 12.5% (cash investor & local advocate), and Mark Caplow 50% (land owner).
Hailey ID Project - # of homes = 2
Based on
Cost
Cost
$5,656,672
Loan to Value
75.69%
Loan Amount
$4,281,671
Hailey - Sources of Funds
SOURCES
TOTAL
Capital - Owner
$125,000
Land - Owner
$1,250,000
Permanent Financing
$4,281,672
Total Sources
$5,656,672
USES
Hard Costs
$3,222,600
Soft Costs
$359,025
FF&E
$325,000
Working Capital
$206,300
Total Uses
$4,112,925
Equity Required
$(1,543,747)
Land is valued at $1.25MM for 150 N. 1st Ave, Hailey, ID (Lot 2, Bock 1, Northridge VIII)
HAILEY PROJECT ASSUMPTIONS
The Cottages of Sun Valley Equity Investment
Land $1,250,000 Cash $125,000
Total $1,375,000 % of Total Cost 24%
Hailey Facility Costs
Description Amount ($)
Land Cost $1,250,000
Hard Costs $3,316,347
Soft Costs $565,325
FF&E $325,000
Contingency $200,000
Total Project Costs $5,656,672
Project Assumptions
# of Beds 32 # of Units 32
Building Square Footage 22,800 Land Acreage 2
Construction Period (months) 12
Lease-up Period (months) 8
Total RentS
Unit Type # Units Beds/unit
Total Capacity (Beds)
SF Total SF
Rent per Bed (Private)
Rent per Unit
(Private) Rent/SF Monthly
Rent Annual Rent
AL-Private 1 1 1 425 425 $3,600 $3,600 $8.47 $3,600 $43,200
AL-Private 2 1 2 395 790 $3,600 $3,600 $9.11 $7,200 $86,400
AL-Private 1 1 1 354 354 $3,600 $3,600 $10.17 $3,600 $43,200
AL-Private 5 1 5 338 1,690 $3,600 $3,600 $10.65 $18,000 $216,000
AL-Private 7 1 7 312 2,184 $3,600 $3,600 $11.54 $25,200 $302,400
MC-Private 1 1 1 425 425 $4,800 $4,800 $11.29 $4,800 $57,600
MC-Private 2 1 2 395 790 $4,800 $4,800 $12.15 $9,600 $115,200
MC-Private 1 1 1 354 354 $4,800 $4,800 $13.56 $4,800 $57,600
MC-Private 5 1 5 338 1,690 $4,800 $4,800 $14.20 $24,000 $288,000
MC-Private 7 1 7 312 2,184 $4,800 $4,800 $15.38 $33,600 $403,200
Totals 32 32 10,886 $134,400 $1,612,800
Averages 340 $4,200 $4,200 $12.35
Cottages Sun Valley ID - Operating Statement
Year
Const. 2 3 4 5
2014 2015 2016 2017 2018
Income Total Revenue $0 $761,760 $1,568,160 $1,614,125 $1,661,469
Total COGS $87,060 $569,553 $772,308 $795,466 $819,320 Gross Profit ($87,060) $192,207 $795,852 $818,659 $842,149
Total Operating Expenses $45,900 $223,613 $270,750 $278,873 $287,239 Total COGS $87,060 $569,553 $772,308 $795,466 $819,320
Residence Operating Expenses $132,960 $793,166 $1,043,058 $1,074,339 $1,106,558 Operating Expense Ratio % 95% 62% 62% 62% Net Operating Income ($132,960) ($31,406) $525,102 $539,786 $554,911 Operating Margin % 5% 38% 38% 38%
JY#03&18&14# !
Version 1 - more conservative Revenue (no resident service revenue)
Const. 2 3 4 52014 2015 2016 2017 2018
Income$0 $1,612,800 $1,612,800 $1,661,184 $1,711,020$0 $0 $0 $0 $0$0 $1,612,800 $1,612,800 $1,661,184 $1,711,020$0 ($887,040) ($80,640) ($83,059) ($85,551)
55% 5% 5% 5%$0 $725,760 $1,532,160 $1,578,125 $1,625,469
$0 $36,000 $36,000 $36,000 $36,000$0 $36,000 $36,000 $36,000 $36,000
$0 $761,760 $1,568,160 $1,614,125 $1,661,469
$52,500 $70,000 $72,100 $74,263$18,000 $9,000 $9,270 $9,548$41,928 $83,808 $86,311 $88,890
$72,000 $360,000 $480,000 $494,400 $509,232$14,160 $70,800 $94,400 $97,232 $100,149
$900 $4,500 $6,000 $6,180 $6,365$6,750 $9,000 $9,270 $9,548$5,250 $7,000 $7,210 $7,426
$600 $800 $824 $849$1,350 $1,800 $1,854 $1,910$4,500 $6,000 $6,180 $6,365$3,375 $4,500 $4,635 $4,774
$87,060 $569,553 $772,308 $795,466 $819,320($87,060) $192,207 $795,852 $818,659 $842,149
$10,500 $14,000 $14,420 $14,853$5,250 $7,000 $7,210 $7,426$2,100 $2,800 $2,884 $2,971
$30,000 $30,000 $15,000 $15,450 $15,914$1,875 $2,500 $2,575 $2,652
$11,250 $15,000 $15,450 $15,914$600 $800 $824 $849
$3,000 $4,000 $4,120 $4,244$113 $150 $155 $159
$1,050 $1,400 $1,442 $1,485$225 $300 $309 $318
$12,000 $16,000 $16,480 $16,974$900 $1,200 $1,236 $1,273
$7,200 $7,200 $7,200 $7,416 $7,638$6,750 $9,000 $9,270 $9,548
$5,100 $5,100 $6,800 $7,004 $7,214$600 $800 $824 $849
$3,000 $4,000 $4,120 $4,244$51,000 $68,000 $70,040 $72,141
$8,250 $11,000 $11,330 $11,670$1,500 $2,000 $2,060 $2,122
$12,750 $17,000 $17,510 $18,035$1,500 $1,500 $2,000 $2,060 $2,122$2,100 $2,100 $2,800 $2,884 $2,971
$45,000 $60,000 $61,800 $63,654$45,900 $223,613 $270,750 $278,873 $287,239$87,060 $569,553 $772,308 $795,466 $819,320
$132,960 $793,166 $1,043,058 $1,074,339 $1,106,55895% 62% 62% 62%
($132,960) ($31,406) $525,102 $539,786 $554,911 5% 38% 38% 38%
JY#03&18&14
Net Operating IncomeOperating Margin %
Utilities ExpenseTotal Operating ExpensesTotal COGSResidence Operating Expenses Operating Expense Ratio %
Property Taxes ExpenseRepairs & MaintenanceYard MaintenanceTelephone ExpensesTraining FeesTravel & Entertainment
Insurance (key man) ExpenseLicensing ExpenseLegal Fees ExpenseMarketing Wages & Miscellaneous ExpenseOffice Supplies Expense
Quality Assurance ExpenseContract Labor DieticianCopies & Postage ExpenseDues & SubscriptionsIndustry Meetings ExpenseInsurance Building & Contents
Accounting ExpenseActivities & EntertainmentVan - Gas and MaintenanceAdvertising ExpenseComputer & Software ExpenseContract Labor Nurse
Supplies-Nursing-ExpenseSupplies-Household-Expense
Total COGS Gross Profit
Operating Expenses
Payroll Burden ExpenseInsurance & Benefits ExpenseMarketing-Lease upPlacement FeeAdmin-Quality AssuranceSupplies-Cleaning-Expense
Cost of Goods SoldFood ExpenseNew Move-In ExpenseManagement FeePayroll Salaries & Wages
Total Revenue
Operating Expenses
Less Vacancy Vacancy %
Total Rent & Service Income
Community FeesTotal Other Income
Operating Statement
Year
Room & BoardResident ServicesPotential Gross Income
3/18/14 Page 11
Total Number of ALZ Units 16 16 # of Homes 1 1 2Rent Per Month ALZ Units (memory care) $4,500.00 Land Cost $1,250,000Total Number of ALF Units 16 16 Bldg.Cost (for dep.) $3,100,000Rent Per Month ALF Units (assisted living) $3,800.00 Economic Life - Building 35Move-In Fee $1,500 Capitalization Rate 9.25%New Move-Ins per month 1 Reversion Sales Cost 4.0%Vacancy 10.0% Rent Increase 3.0%All Expenses Monthly $78,754 Holding Period (Yrs.) 10Building Cost $3,900,000 Balance of Loan (10th Yr.) $3,672,626 Loan Amount 110% $4,281,671 Tax Rate 0.00% Cash Partners Invested (Net) $125,000 Annual Payment $288,000 Rate 5.25% 1st TD Term (years) 25 Calculated Value (Stabilized) $5,677,751 DSC 1.82
STABILIZED OCCUPANCY Cnstrctn Lease Up Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11GROSS RENT POTENTIAL STABILIZED Sale Rental Income $1,593,600 $1,641,408 $1,690,650 $1,741,370 $1,793,611 $1,847,419 $1,902,842 $1,959,927 $2,018,725 Other Income $36,000 $36,000 $36,000 $36,000 $36,000 $36,000 $36,000 $36,000 $36,000
________ ________ ________ ________ ________ ________ ________ ________ ________TOTAL GROSS INCOME $1,629,600 $1,677,408 $1,726,650 $1,777,370 $1,829,611 $1,883,419 $1,938,842 $1,995,927 $2,054,725 VACANCY (159,360) (164,141) (169,065) (174,137) (179,361) (184,742) (190,284) (195,993) (201,872)
________ ________ ________ ________ ________ ________ ________ ________ ________EFFECTIVE GROSS INCOME $1,470,240 $1,513,267 $1,557,585 $1,603,233 $1,650,250 $1,698,677 $1,748,558 $1,799,934 $1,852,852EXPENSES (945,048) (973,399) (1,002,601) (1,032,679) (1,063,660) (1,095,570) (1,128,437) (1,162,290) (1,197,159)
________ ________ ________ ________ ________ ________ ________ ________ ________NET OPERATING INCOME $525,192 $539,868 $554,984 $570,553 $586,590 $603,108 $620,121 $637,644 $655,694 Interest (TD) (224,788) (221,469) (217,976) (214,300) (210,431) (206,358) (202,072) (197,561) (192,813) Depreciation (88,571) (88,571) (88,571) (88,571) (88,571) (88,571) (88,571) (88,571) (88,571)
________ ________ ________ ________ ________ ________ ________ ________ ________ Sub-total 211,833 229,827 248,436 267,682 287,588 308,178 329,477 351,512 374,309GAIN FROM SALE
________ ________ ________ ________ ________ ________ ________ ________ ________TOTAL TAXABLE INCOME 211,833 229,827 248,436 267,682 287,588 308,178 329,477 351,512 374,309
AFTER TAX CASH FLOWYEAR 1 2 3 4 5 6 7 8 9 10 11NET INCOME $525,192 $539,868 $554,984 $570,553 $586,590 $603,108 $620,121 $637,644 $655,694DEBT SERVICE (TD) (288,000) (288,000) (288,000) (288,000) (288,000) (288,000) (288,000) (288,000) (288,000)Preferred Return 0 0 0 0 0 0 0 0 0REVERSION Capitalized Value 11th year NOI/OAR $7,088,582 Less 1st TD Balance (3,672,626) Less Sales Costs (283,543)
$125,000 0 ________ ________ ________ ________ ________ ________ ________ ________ ________ Before tax cash flow $237,192 $251,868 $266,984 $282,553 $298,590 $315,108 $332,121 $3,482,057 $367,694TAX SAVINGS/(LIABILITY) 0 0 0 0 0 0 0 0 0
________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________CASH FLOW $125,000 $0 $237,192 $251,868 $266,984 $282,553 $298,590 $315,108 $332,121 $3,482,057 $367,694
IRR Calculation -$125,000 $0 $0 $35,579 $37,780 $40,048 $113,407 $44,788 $47,266 $49,818 $522,308Loan Balance 1st TD 4,218,459 4,151,928 4,081,904 4,008,204 3,930,635 3,848,993 3,763,065 3,672,626Depreciated Value for the Building 3,011,429 2,922,857 2,834,286 2,745,714 2,657,143 2,568,571 2,480,000 2,391,429
JY#03&18&14
ASSUMPTIONS
MARKET & COMPETITIVE ANALYSIS While the coming demand for state-of-the-art senior housing is abundantly clear, the development and operations team has drawn on its years of experience and knowledge to focus on best locations to maximize return on investment. Through past experience, thoughtful planning and careful development, The Cottages LLC has developed a formula to ensure that facilities are constructed in areas where demand for the product is greatest, we face limited competition and the median household income can support the rates we prefer to charge. This formula includes identifying areas with close proximities to hospitals, the median household incomes of those areas that are aged 45-65 (the children of these seniors in the area that will be financially supporting their parents), and studying local demographics to understand the potential demand for senior housing, including combining Memory Care in every Assisted Living facility.
Once an area has been identified as a potential building site, we perform an in depth market analysis to not only verify its viability, but to also determine the number of senior units the area can support, the occupancy rate of competitive facilities, and the ability of area residents to meet the financial requirements of housing their parents in high-end senior housing. Included in the analysis is a calculation for the cost of the employees required to staff the facility. The Cottages sets aside reserves to accommodate these jobs while the facility is being leased up and stabilized. This usually takes a maximum of 8-12 months for construction and another 8-12 months to reach occupancy depending upon the market and competition.
The Cottages has identified Blaine County and Hailey, ID more specifically as a desirable market to enter. The Cottages has surveyed a 10-mile radius as the most appropriate distance, given the rural nature of the market, senior residents would move to one of our facilities.
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Hailey IDPhase I - (10) Mile Radius
Site InformationCountyCities nearbyCDFI / NMTC CON
ESRI Data for Primary Market Households 2010 2012 2017Total Population - (10) Mile Radius 6,683 7,035 7,429 50-54 yr 1,695 1,720 1,595 55-64 yr 2,866 3,045 3,197 65-74 yr 1,438 1,565 1,891 75+ yr 684 705 746
$357,807 $375,760$107,342 $112,728$250,465 $263,032($22,981) ($24,134)
44,302$ 49,192$ 52.05% 59.35%
Owner Occupied (65+ yr) 20.50% 435 465 541Renter Occupied (65+ yr) 5.80% 123 132 153
242 32168 91
311 412
Independent Living Analysis 2012 2017IL Competition - (10) Mile Radius Total Beds Miles Census RatesNone
Total Beds 0IL Target Annual Rent 1,800$ (Month) 21,600$ 21,600$ Estimated Additional Income Required $ 36,000 (60% Annual Income) 13,019$ 11,866$ Total IL Units Demanded 25 33 IL Supply on Market 0 0Total IL Demand Available 25 33
Assisted Living Analysis 2012 2017AL Competition - (10) Mile Radius Total Beds Miles Census RatesSafe Haven Homes 12 4.9
Total Beds 12AL Target Annual Rent 4,035$ (Month) 48,420$ 48,420$ Estimated Additional Income Required $ 60,525 (80% Annual Income) 37,544$ 36,391$
99 13232 4219 2525 3412 1213 22
Memory Care Analysis 2012 2017MC Competition - (10) Mile Radius Total Beds Miles Census RatesNone
Total Beds 0AL Target Annual Rent 4,293$ (Month) 51,519$ 51,519$ Estimated Additional Income Required $ 64,399 (80% Annual Income) 41,417$ 40,264$
99 13232 4219 2525 340 0
25 34
BlaineBellevue, Ketchum
Median Home Value (50+ yr)30% Mortgage, Closing CostsNet InvestmentAnnuity 5% / 15 YearAverage Median Household Income (65+ yr)Average Percentage $25,000 - 99,999 (65+ yr)
Affordability Index Owners (65+ yr)Affordability Index Renters (65+ yr)Total Affordability Persons (65+ yr)
NoNo
Total AL Demand Available
Total MC Demand Available
ADL / IADL LimitationsPotential Capture RateOutside MarketTotal MC Units DemandedMC Supply on Market
AL Supply on MarketTotal AL Units DemandedOutside MarketPotential Capture RateADL / IADL Limitations
Reporting 1 Race Population Total 38,042 White 90.4% Black 1.4% Asian 1.5% Hispanic 10.3%
9/18/2013
The Hailey location is 150 N. 1st Ave, with the southwestern border of the site on Main Street. "
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SITE PLAN
820 S. Main, Hailey, Idaho
PDF created with pdfFactory trial version www.pdffactory.com
For a detailed site plan submitted and approved by the Hailey, ID city and planning department visit:
http://bit.ly/1hyTQxz - Hailey Site Plan 2 facilities