North Texas Seniors Facilities' Developers Ink Buyout Plan

Gary Staats, president of the Fort Worth-based Covenant Group, tells GlobeSt.com that the sale includes the under-construction, 124-unit Mountainview Estates in Grand Prairie and a full pipeline that he's closely guarding due to the highly competitive nature of the seniors living business. "It's an alliance that we're very pleased with," he says, adding several other competitors through the years have been turned away. "They will bring us development opportunities and we will be them management opportunities."

Buyout talks began two months ago for the management company, which oversees 16 properties, with a resident capacity of 2,070, in Arkansas, Mississippi, Oklahoma and Texas, of course. Staats says the mix of independent and assisted living facilities belong to 10 owners, with the Covenant Group holding title to 542 units in six facilities in Dallas/Fort Worth and one in Abilene. The Dallas-based Capital Senior Living also gets first right of refusal through 2009 should the Covenant Group decide to sell its properties. "We have no immediate intention to sell them," Staats stresses. "Our intention is to continue in ownership ... and the business of building."

The buyer agreed to retain the 500 employees of CGI Management Inc. Staat says the portfolio, developed in the early 1980s, has an average occupancy of 90%. The seven owned properties are 92% occupied, he adds.

The sale will close in Q3: $2.5 million coming at closing and three deferred payments of $366,667 on the first, third and fifth anniversaries of the turnover. Capital Senior Living will use cash on hand to buy the management company's stock. The agreement's deferred payments can be reduced if the nine other owners terminate their pacts and the Covenant Group doesn't have substitute properties in place.

"It's a challenge to release something that we've cared and nurtured for so long, but we're confident this is a great decision," Staats says. "We felt the similarities in operating philosophies gave us comfort as we transition these properties ... for residents and employees."

The portfolio is made of 79% independent living properties and the balance, assisted living, with 95% of the revenues derived from private pay sources, according to yesterday's press release. The buyer's portfolio now consists of 42 facilities in 20 states, with full or partial ownership in 41 of the assets.