Family Office Acquires American Health Partners' Skilled Nursing Division
The deal with MFO was reflective of AHP’s recognition of "consolidation taking place in the long-term care space and the substantial capital investment that would be required to continue fueling the business."
Michigan-based investment firm Mitchell Family Office has inked a $168 million bridge loan by Lument to acquire the skilled nursing division of American Health Partners, a play that was part of a larger plan by MFO to acquire all interests of AHP.
American Health Partners, which was formerly owned by an employee stock ownership plan, consists of seven divisions: the 29 SNF American Health Communities; Rehab America, which focuses on inpatient and outpatient rehabilitative services; American Health Plans, which offers Medicare Advantage institutional special needs plans (I-SNPs); TruHealth, which coordinates care and provides enhanced bedside treatment for residents in long-term care facilities; Unity Psychiatric Care, which offers acute psychiatric and behavioral care; Tennessee Quality Care, offering home health, private duty nursing and hospice services; and AmPharm, which offers institutional pharmacy services.
The deal with MFO was reflective of AHP’s recognition of “consolidation taking place in the long-term care space and the substantial capital investment that would be required to continue fueling the business,” the companies said in a statement.
“MFO is the right investment partner at the right time,” said Jeff Bogle, chief financial officer, American Health Partners. “MFO has the healthcare expertise and financial resources to enhance stability, strengthen our foundation, and provide the necessary capital to grow our business.”
Lument was brought in as a placement agent last summer and “quickly decided that bridge-to-HUD financing would provide the best execution and terms for the SNF portfolio,” said Conner Girdley, director for senior housing and healthcare at Lument. The bridge loan will be refinanced using the FHA Section 232/223(f) program, which allows long-term nonrecourse loan with a low, fixed-rate pricing.
The SNF industry has been reeling from a recent announcement by the Center For Medicare and Medicaid Services’ regarding their reimbursement proposal for FY22. The agency’s budgeted increase for FY22 is significantly lower than the $750 million awarded last year and includes a 1.3% year-over-year increase, accounting for about $444 million in Medicare Part A payment to SNFs next fiscal year. A recent analysis of the changes by Mizuho Securities noted that they could weaken rent coverage going forward, and said that increased tenant credit risk typically negatively impacts valuation multiples.