Analysis of Investments

Senior Care Alta Ridge

Madison Realty Companies

Madison Realty Company Senior Care Alta Ridge is an investment into three senior care facilities located in Salt Lake City, Utah. These facilities provide memory care and assisted living.

Investment Highlights

  • Yr. 1 Cash-on-Cash 6.27%
  • Initial Occupancy
  • Est. Time Horizon None YEARS
  • Current Cash Flow
  • Yr. 1 Cap Rate to Investor 8.13%
  • Investor Purchase Price $14,600,000
  • Total Offering Size $8,500,000

Loan Information

The loan is for a total of $6,100,000 and is from SunWest Bank. The term is for a total of 7 years with no interest only period. Amortization is based on a 25 year schedule. The interest rate is 2.5% + the 7 year SWAP rate with a floor of 4.75%.

  • Yr. 1 DSCR 2.68
  • Loan-to-Offering 41.78%
  • Hold Period DSCR 2.84

Tenant Information & Lease Terms

The operator of these properties is Alta Ridge Communities who only operates these three properties. The services offered at the property include memory care and assisted living. The operator is family focused and has 25 years of experience in senior care.

Key Positives

  • The Debt Service Coverage Ratio is projected to be 2.68 in year 1 and average 2.84 during the hold term which should allow for ability to cover the loan payments.

  • The population in the Salt Lake City area is projected to grow for the age demographic of 50+. The growth rate is projected to be 1.13% and this may lead to more demand for senior care housing in the market.

Key Risks to Consider

  • The operating assumptions of the sponsor are aggressive. The properties are older and may need significant capital expenditures to maintain, however the sponsor is only projecting 2% growth in operating expenses.

  • The sponsor is also increasing their NOI by over 50% in year 1 compared to the trailing 12 months at the property.

  • The trailing 12 cap rate to investors is low (5.25%).

  • The sponsor is projecting economic occupancy of 100% which does not allow them disruptions or vacancies to hit their projections.

  • The resident turnover at these properties is high, which leads to uncertainty of future occupancy rates.

Investment Sponsor Information

Madison Realty Companies

According to the sponsor's website: "Madison Realty Companies is a private real estate firm with expertise in acquiring income producing real estate. We were founded over 20 years ago. Each member of our senior executive team has 30 plus years of individual experience. We have acquired and managed over six billion dollars of U.S. real estate in over 30 states.

Our clients are institutions, individuals and foreign investors who are seeking risk adjusted, attractive rates of return.

Safety. We purchase properties below market value. This provides us a margin of error.

Upside. We upgrade or expand properties to add value to our investors' capital and increase cash flows."