Financing & Investment (January 2006)

Beverly Enterprises amends merger
FILLMORE CAPITAL TO REPLACE NORTH AMERICAN SENIOR CARE AS PARTNER

By Murray W. Wolf

Beverly Enterprises Inc. (NYSE: BEV) of Fort Smith, Ark., announced Nov. 21 that financing commitments related to its previously reported merger process had been fulfilled, including receipt of a $350 million equity commitment and a $50 million letter of credit.

The company has entered into an amended merger agreement at a revised all-cash price of $12.50 per share. Under the amended agreement, Fillmore Strategic Investors LLC, an affiliate of Fillmore Capital Partners – a private equity firm focused on investments principally in the lodging and healthcare sectors – will replace North American Senior Care (NASC) and its affiliates as the acquiring entity.

Beverly officials would not comment on why NASC is no longer a party to the merger agreement.

The amended agreement, which has been unanimously approved by the BEI Board of Directors, provides for a total transaction value of more than $1.8 billion.

Fillmore Capital Partners is a private equity firm serving institutional investors and high net worth individuals with structured investments principally in the lodging and healthcare sectors.  Since forming FCP, the company has originated a subordinated debt portfolio approaching $1 billion in outstanding loans and will exceed $1 billion in new investment originations in 2005. Most notable large transactions in 2005 include: the corporate financing of Wyndham International Inc., a $150 million subordinated CMBS debt investment; and Healthcare I, a $100 million subordinated CMBS debt investment.

Health Management Associates keeps snapping up hospitals

NAPLES, Fla. – Health Management Associates Inc. (NYSE: HMA) announced Dec. 1 that it had closed on the first of four previous announced non-urban general acute-care hospital acquisition. HMA closed on the acquisition of Gilmore Memorial Hospital in Armory, Miss.

In addition to the Gilmore Memorial deal, HMA has reached definitive agreements on two more of the planned acquisitions.

One is for 56-bed Barrow Community Hospital in Winder, Ga. The execution and closing of the purchase agreement are subject to the review and approval of the Georgia Attorney General’s Office.

The other is to acquire 80 percent of 84-bed Orlando Regional St. Cloud Hospital in St. Cloud, Fla. Orlando Regional Healthcare will retain a 20 percent ownership. That transaction was expected to be completed by Dec. 31. It would be the first partnership between HMA and a not-for-profit hospital.

“The hospital acquisition environment for HMA remains very active,” according to a statement from the firm, which plans to acquire five to seven more hospitals in 2006.

Horizon Health plans to acquire eight facilities

LEWISVILLE, Texas – Horizon Health Corp. (NASDAQ/NM: HORC) announced in that November that it has entered into a letter of intent to acquire the behavioral health facilities of Lighthouse Care Centers LLC and Focus Healthcare LLC.

Lighthouse Care Centers operates four behavioral health facilities in Georgia and South Carolina. Focus Healthcare operates four facilities in Delaware, Florida, Georgia and Ohio. The facilities have a combined total licensed capacity of 568 beds.

The transaction is expected to close during the second quarter but is subject to a number of contingencies including the negotiation and execution of definitive agreements between the parties. In addition, the transaction is subject to receipt of government approvals including certificate of need and licensing approvals.

Horizon Health Corp. is a contract manager of clinical services for acute-care hospitals and employers, and an owner of behavioral health care facilities.

More Financial News

As this edition of Healthcare Real Estate Insights^™ went to press in mid-December, Windrose Medical Properties Trust (NYSE: WRS) was one property away from completing its previously announced acquisition of 22 medical properties. On Dec. 14, the real estate investment trust (REIT) announced that it had closed on two MOBs for about $21.4 million, including about $6.9 million in cash and about $14.5 million in assumed debt. The properties are in Palm Springs, Calif., and Wellington, Fla…. Health Care Property Investors Inc. (NYSE:HCP) acquired seven MOBs for about $52 million on Oct. 19, according to a Form 10-Q filed Oct. 31 with the Securities and Exchange Commission (SEC). The quarterly report didn’t reveal the location of the MOBs or the seller. But, it did say that the MOBs totaled about 351,000 square feet, and the $52 million purchase price included assumed debt and non-managing member LLC units (downREIT units) valued at $25 million and $11 million, respectively… HCA Inc. (NYSE: HCA) reported Nov. 30 that it had completed the sale of five rural hospitals to Brentwood, Tenn.-based Capella Healthcare Inc. for about $260 million. The facilities include two hospitals in Tennessee and one each in Louisiana, Oklahoma and Washington. The sales were part of a previously announced divestiture of HCA hospitals, primarily in non-urban markets. GTCR Golder Rauner LLC, a private equity firm, announced in May that it had entered into a partnership with Daniel Slipkovich and Thomas Anderson to form Capella Healthcare. The company says it plans to focus on the acquisition and construction of acute-care hospitals… Senior Housing Properties Trust (NYSE: SNH) closed a $58 million sale/leaseback transaction with Five Star Quality Care Inc. (AMEX: FVE). SNH purchased six assisted living communities in western Pennsylvania with a total resident licensed capacity of 654… Health Care REIT Inc. (NYSE:HCN) says it completed $17.2 million of gross investments during the third quarter of 2005. New facility acquisitions for the quarter included one skilled nursing facility with 107 beds for $3 million and one assisted living facility with 101 units for $8 million. The balance of the gross investment amount consisted primarily of construction and other advances for existing operators… Capital Senior Living Corp. (NYSE:CSU) has executed an agreement with Ventas  Inc. (NYSE:VTR) to lease a senior living community which Ventas has purchased. The 162-unit Georgetowne Place in Fort Wayne, Ind., was purchased by Ventas for about $19.5 million… Pacer Health Corp. (OTCBB: PHLH) was scheduled to assume management responsibilities by Dec. 1 for Southpark Community Hospital, a 54,000-square foot, acute-care hospital located in South Lafayette, La. The Miami-based owner-operator of acute-care hospitals, medical treatment centers and psychiatric care facilities in the Southeast, announced in November that it has signed a binding letter of intent to acquire a majority interest in the facility. Terms were not disclosed. Southpark was developed by a group of 37 physician-investors, who selected Pacer Health as their management and equity partner…  

MedCapital Group of Dallas recently announced that it had arranged $3.9 million in permanent financing for an undisclosed multi-discipline ambulatory surgery center in Houston. The firm also arranged recently $6 million in permanent financing for a 15,000 square foot MOB in Southern California… Cambridge Realty Capital Cos. says it fielded 25 loan origination requests totaling $273.3 million during the month of November, compared with $183.6 million during the same month last year. Cambridge also reported that during the 2005 fiscal year ending in October, the U.S. Department of Housing & Urban Development (HUD) reported that Cambridge had more HUD-approved nursing home loans on the books than any lender in the nation, and it ranked second behind GMAC Commercial Mortgage Bank in the overall healthcare category. The HUD 232 program funds nursing homes, assisted living and board & care properties. Recent Cambridge transactions included a $4.67 million loan to refinance River Ridge, a 64-bed skilled care nursing home in Kennebunk, Maine; a $10.5 million conventional loan to refinance Ingleside Care Center, a 118-bed psychiatric hospital in Rosemead, Calif.; and a $4.17 million FHA-insured HUD loan to refinance Jerseyville Manor, a 92-bed skilled care nursing home in Galesburg, Ill.