Nursing home operator McGuire Group said Thursday that it sold all of its Western New York properties and one on Long Island to a California-based real estate firm for $100 million but will continue operating all of them under long-term leases.
Nationwide Health Properties of Newport Beach, Calif., bought four McGuire nursing homes in Erie County, one in Niagara County and one on Long Island.
They include Autumn View Health Care Facility in Hamburg, Garden Gate Health Care Facility in Cheektowaga, Harris Hill Nursing Facility in Lancaster, Seneca Health Care Center in West Seneca and the Northgate Health Care Facility in North Tonawanda, plus Long Island's Brookhaven Health Care Facility in East Patchogue.
Specifically, NHP paid $71.2 million for the four Erie County facilities, $11.6 million for the one in Niagara County, and $17.1 million for Brookhaven in Suffolk County.
The deal closed Wednesday, but McGuire will now lease the properties back for terms ranging from 20 to 35 years as part of a "strategic relationship" with NHP.
McGuire's 2,000 employees will continue operating the six facilities, and patients and their families will not notice any changes. The Western New York facilities have 966 beds, while Brookhaven has 160.
"We want our patients, families and employees to understand the sale is entirely separate from the health care operating arm," said President and CEO F. James McGuire, son of the company founder, Frank J. McGuire.
"Our family remains committed to the health care business and the patients we serve. This is simply a real estate transaction."
But the whopping transaction, which McGuire described as a "recapitalization" of the Buffalo-based firm, means that McGuire Group is mostly getting out of the business of owning its nursing homes. The company retained one home in Michigan, with McGuire citing "different circumstances" in that facility. It also owns unrelated commercial real estate through a separate division.
McGuire said the company has been "exploring" various debt and recapitalization options over the last two years, in a bid to fund about $30 million in renovations and expansions that it has completed, while accumulating extra money to handle "the challenges and opportunities that lie ahead in the health care industry." He said the company is not under any financial duress.
The company considered a sale/lease-back with a group of private investors and also "talked to numerous" real estate investment trusts, including NHP. And it considered various forms of refinancing through the U.S. Department of Housing and Urban Development, as well as bridge financing from a bank.
Ultimately, though, "this provided the long-term strategic relationship that seemed to be a good fit for our business," McGuire said, adding that a "mutual friend" introduced him to NHP.
He declined to comment on whether the company might use the cash to buy or build additional nursing homes but said the firm wanted financial liquidity for the "volatility and changes that the nature of this industry is subject to."
The extra capital will also be available for McGuire Development, the commercial real estate arm, to handle more projects in the future, he said.
"We believe that the recapitalization of various real estate entities will only strengthen our current portfolio of companies," he said.
McGuire Group opened its first skilled nursing home in West Seneca in 1974 and has since expanded to also provide inpatient and outpatient rehabilitation services for more than 5,000 patients per year. It also offers secured memory care units at two sites for patients with Alzheimer's disease and dementia.
The privately held firm consists of several companies that operate skilled nursing care, subacute and outpatient rehabilitation, institutional pharmacy and commercial real estate development businesses. The nursing homes are operated and maintained by two separate arms of the company, with one controlling the real estate and the other managing the facilities. The sale does not include any of the companies or individuals, the company said.
Founded in 1985, NHP is a publicly trade health care real estate investment trust that invests in senior citizen housing, long-term care facilities and medical office buildings nationwide.
It currently owns 637 properties valued at $4.9 billion in 43 states, including 287 assisted- and independent-living communities, 211 skilled nursing facilities, 120 medical office buildings, 11 "continuing care" retirement communities, seven specialty hospitals and one property under development.
The company spent $924 million on purchases last year, including $248 million in the fourth quarter, and has an additional $243 million in purchases slated to close by March 31.