Success Stories

The Background: From Foreclosure to Financially Viable 

Every acquisition has its twists and turns, but the journey from foreclosure to financially viable isn’t always foolproof. When a seasoned seniors housing owner and operator saw a 107-unit assisted living facility languishing in neglect, he saw promise in improving conditions for residents, while breathing new life into the property on the path to profitability.

In a tale as old as time, a once rosy business partnership fractured, resulting in finger pointing, lawsuits, and jeopardizing the assisted living facility’s licensure and quality of life for residents. The infighting among owners was so contentious that the assisted living building fell into disrepair, and they stopped making mortgage payments, sending the facility to foreclosure.

Navigating the financial maze of foreclosure, bankruptcy, due diligence, purchase and sale agreements, and more, sealing the deal was filled with twists and turns due to a myriad of unexpected complications. From ongoing negotiations and licensure transition to immediate capital expenditures, this opportunistic acquisition was not a transaction for the faint of heart.

Fortunately, the marriage of an experienced owner-operator with a track record of turnarounds, paired with Wilshire Finance Partners’ sage advice, entrepreneurial experience, and capital backing, made this opportunistic acquisition possible.

Opportunistic Acquisition: As the name implies, opportunistic acquisitions are marketplace opportunities representing risk and challenges, but simultaneously have tremendous potential for the right operator and management team. These acquisitions are complicated projects and may not see a return on investment for a few years. To be successful, an experienced owner or operator must helm an opportunistic acquisition with a talented in-market management team to make the turnaround possible. Opportunistic facilities often are cash flow constrained at acquisition due to lower occupancy and higher relative expenses, but present potential to produce a tremendous amount of cash flow once changes are made.

At Wilshire Finance Partners (Wilshire) we are in the business of financing opportunities, whether that’s to acquire a single facility or several facilities. We provide bridge loans and capital strategies from $1 million to $10 million to finance opportunistic and value-add acquisitions, specifically when an acquisition may have twists and turns that do not meet traditional lending requirements.

The Challenge: A Soured Partnership Sends Facility Spiraling

A trio of business partners envisioned a CCRC (continuing care retirement community) that would span across multiple parcels of land. An initial 60,859 square foot building was constructed, straddling several parcels, offering 107 assisted living units. Their once chummy partnership sours, leading to disputes in ownership and allegations of financial mismanagement, along with stalling future development phases. The owners stopped paying on the mortgage and the property was in foreclosure. The assisted living facility’s license was suspended and after bankruptcy was filed, a receiver was appointed to replace the owners as debtor in possession and maintain operations. During that multi-year transition, the facility’s equipment was not maintained, nor were any improvements made, and occupancy dipped to 68%. Several air conditioning units were broken and an unrepaired hole in the roof created extensive water damage and mold. The main phone system was inoperable, along with a sewage grinder in disrepair. The outdoor pool languished in a perpetually closed state due to a broken pump.

Each day navigating the acquisition presented new challenges. In another unexpected twist, the land parcels were all under different ownership, further complicating an already convoluted ownership agreement, with ongoing lawsuits between owners creating noise in the background. The licensure transfer was also stymied at varying points due to liability concerns, with the receiver unwilling to enter into an operations transfer agreement.

While the owners bickered, employees were left to fend for themselves without adequate direction and oversight, resulting in ineffective operations and apathetic attitudes.