Assisted Living Update

Greenbriar Corp. resolves dispute

Greenbriar Corp. in Dallas has resolved its dispute with LSOF Pooled Equity over the amount and nature of LSOF’s ownership of Greenbriar. The dispute centered around the number of shares of Greenbriar common stock, the extent of control to which LSOF was entitled upon conversion of its Series F and G preferred stock, and the amount then due under a make-whole agreement. LSOF’s position would have resulted in its receiving voting control of the company, which Greenbriar resisted in litigation.

Under the terms of the settlement, Greenbriar will repurchase all of LSOF’s ownership interests in Greenbriar and LSOF will release all claims in exchange for $4 million in cash and the conveyance of 11 assisted living properties out of the 25 owned and operated by Greenbriar. Greenbriar will then release LSOF from all claims. Greenbriar previously borrowed $12 million from Vestin Mortgage to acquire two of the properties to be conveyed to LSOF. The settlement should close by the end of the third quarter.

Advocat has loss in second quarter

Advocat of Franklin, TN, which operates skilled nursing and assisted living communities in the United States and Canada, reported a second-quarter loss of $2.4 million or 43 cents per diluted share, compared with earnings of $73,000 or 1 cent per share. Net revenues increased 4% to $50.2 million, compared with $48.2 million.

Net revenues for U.S. assisted living facilities declined 2.7% to $7.8 million, compared with $8.1 million. Canadian operations were down 2.1% to $3.8 million, compared with $3.9 million. Operating expenses increased 10.7% to $41.1 million, compared with $37.2 million in 2000.

The company previously announced that it had signed a letter of intent to sell its Canadian subsidiary, Diversicare Canada Management Services Co., for $8 million. No definitive purchase agreement has been reached with the proposed buyer.

Advocat operates 120 facilities in 12 states and four Canadian provinces, including 64 skilled nursing facilities containing 7,230 licensed beds and 56 assisted living facilities with 5,425 units.

American Retirement posts a revenue increase

American Retirement Corp. in Nashville, TN, reported a 30% increase in second-quarter revenues of $63.4 million, compared with $48.8 million. Resident and health care revenues grew by 30% to $62.4 million, compared with $47.9 million. The revenue growth resulted from increased performance of the core portfolio of large retirement centers and higher occupancy at stand-alone assisted living communities.

Net operating income from consolidated communities was $18.8 million compared with $15.3 million. Earnings before interest, taxes, depreciation, amortization, and restructuring costs were $13 million, compared with $11.8 million. The company had a loss of $4.6 million or 27 cents per share, compared with a loss of $700,000 or 4 cents per share.

The company sold its only California community, Rossmoor Regency, during the end of the quarter. The $21.5 million purchase price resulted in debt repayment of $15.6 million and a $1.3 million after-tax loss on sale and debt prepayment penalty. Also during the quarter, the company repurchased $1.8 million of its convertible debentures, recording a $235,000 after-tax gain.

The company currently operates 65 senior living communities in 14 states with capacity for 14,700 residents.

Assisted Living Concepts takes a loss in 2001

Assisted Living Concepts in Portland, OR, announced a net loss of $4.6 million for the second quarter or 27 cents per basic and diluted share on revenue of $37.4 million, compared with a net loss of $3.8 million or 22 cents per basic and diluted share on revenue of $34.1 million. Operating income was $255,000, compared with $434,000, and included $1.1 million in debt and lease restructuring costs.

For the six-month period, net loss was $8.8 million or 51 cents per basic and diluted share, on revenue of $74.2 million, compared with a net loss of $7.6 million or 44 cents per basic and diluted share on revenue of $67.3 million. Operating income was $280,000, compared with $462,000.

The company plans to restructure its two series of convertible subordinated debentures and some of its underperforming leases and to potentially convey some underperforming properties subject to mortgages in full satisfaction of the debt due. It is negotiating with a committee of the holders of 64% of the debentures. The preferred share purchase rights granted under the company’s Rights Agreement also expired on July 26. Assisted Living Concepts owns, leases, and operates 185 assisted living residences in 16 states.

ARV Assisted Living posts 2nd-quarter results

ARV Assisted Living, in Costa Mesa, CA, reported quarterly net income of $800,000 or 5 cents per share, compared with net income of $12.8 million or 73 cents per share.

The second quarter net income results include an extraordinary gain of $1.6 million or 10 cents per share in 2000 and $15 million or 86 cents per share in 2001 related to the early extinguishment of debt. Excluding the extraordinary gains, the company would have reported a net loss of $800,000 or 5 cents per share compared with a net loss of $2.2 million or 13 cents per share. Total revenue for the quarter was $35.9 million, compared with $35 million. Income from operations for the quarter was $1.6 million, compared with a net operating loss of $800,000. Total operating expenses for the quarter were $34.3 million, compared with $35.8 million.

For the six-month period, net income was $2.5 million or 14 cents per share, including an extraordinary gain of $1.6 million and a $2.9 million gain on the sale of partnership interests, compared with $15.2 million, including an extraordinary gain of $20.4 million. Without these gains, net loss is $2 million or 11 cents per share, compared with a $5.1 million loss or 30 cents per share. Total revenue $71.3 million, compared with $69.9 million. Income from operations for the six months was $2.4 million, compared with a net loss of $1.7 million. Total operating expenses $68.9 million, compared with $71.6 million.

ARV currently operates 54 communities with approximately 6,600 units in 10 states.

Financing obtained for senior living communities

Collington Episcopal Life Care Community in Mitchellville, MD, has obtained approximately $48 million in tax-exempt bond financing from Ziegler Capital Markets Group, a provider of financing for nonprofit senior living.

The financing will be used by the community to expand and renovate its facilities, including construction of 80 new independent living units, replacing 30, and adding six new assisted living units. After the project, Collington will have 377 independent living units and 100 health centers. The financing was achieved with one of the lowest interest rates of the year for senior living unrated tax-exempt bonds around the country.

Losses are posted at Diversified Sr. Services

Diversified Senior Services in Winston-Salem, NC, reported losses for the second quarter of $901,594 or 19 cents per share on revenues of $1.6 million including write-offs of $688,182. It lost $1.1 million or 24 cents per share on revenues of $3.3 million for the six-month period. Six-month losses included the accrual of $225,797 in preferred stock dividends as well as the $688,182 write-off of costs related to the abandonment of certain properties.

Management fees in the first six months rose 43% to $770,000, compared with $538,000. The company recently added the management of 505 assisted living units in North Carolina and Virginia to its portfolio. William G. Benton, chairman and chief executive, said the company will be able to add at least three more assisted living properties, each with 60 units, without significantly increasing management and administrative overhead.