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Marketing Firm For The County Home
November 18, 2011 - Dunkirk OBSERVER
Posted by Nicholas L. Dean
Marcus & Millichap is a marketing firm.
A representative from the company addressed the County Legislature on Wednesday.
During the meeting, lawmakers tabled a resolution of support regarding the company. Marcus & Millichap has been selected as the firm to advertise the County Home for possible lease, sale or privatization.
At Wednesday's meeting, Joshua Jandris, an associate with the Chicago-based firm, provided details about the company for lawmakers. The opening portion of his comments are transcribed below:
To read yesterday's blog post, quoting legislator Keith Ahlstrom, D-Dunkirk, click HERE! During Wednesday night's meeting, Ahlstrom took issue with one aspect of the print media's coverage of the County Home issue.
My name is Josh Jandris. I'm with the senior housing group of Marcus & Millichap.
We are a firm that's been in business for 40 years: 1,300 broker associates, 43 offices coast-to-coast. In the last five years we've done 20,000 transactions with a dollar amount of almost $64 billion.
We have two offices in New York and nationally, just on the senior housing in the last five years, we've done almost 350 transactions at about $2 billion.
My team, based in Chicago, has worked with seven counties in the last 24 months, closed three transactions, have one other contract and two going to market in the next week. In the last five years also we've sold over $50 million of assets, senior housing alone, in New York.
Working For The County
I'm here tonight because were a respondent to the RFP request that went out a couple months ago, I believe and that whole process was started by me essentially just cold-calling County Executive Greg Edwards.
I know there's a number of questions and obviously I would hope to answer all of them. I would like to maybe be a little bit proactive and address some of them and kind of just present the facts.
I want to make it 100 percent clear that I'm not here to create any motivation for anybody. Everybody is very principled and I respect that. However, the county has been put in an unfortunate situation due to the property tax caps and the serious declines in revenue --- just not only from the nursing home, but all around.
As far as the nursing home goes, New York state has completely overhauled their Medicaid reimbursement system so they're going to regional pricing, they've done away with bed-holds and they've done away with any kind of inflationary increases year-to-year.
In addition to that, Medicare has cut rates by over 11 percent -- with five to six percent probably coming down the pike in maybe the next year or so.
The Big Question:
One of the big questions is why hire us now? So I'd like to address that first and foremost.
If you hired us now, you would be saving yourself a huge amount of time. The process of selling a facility, if you choose to go that route, takes anywhere from 12 to 18 months and if you had an opportunity to look at the budget for next year, all of those things would become realizations for 2013 -- including a $13 to $14 million deficit projected for 2013 and just more growth in pre-retirement pension obligations, health insurance premiums and things along those lines.
My firm is only compensated on a contingency fee basis, so we are only paid if the deal closes. You do not owe us anything if... You hire us, we go out and market the property, we do everything we said we were going to do and you don't pass a resolution to sell the asset, we don't get paid.
I want to make that really clear, I know that's a very big question and I understand why there would be concerns.
Another reason to hire us and I guess this is just kind of from our standpoint is we're extremely committed to the process and all everything we do is on our own dime and on our own time. All we have is time and we've invested a lot in Chautauqua County. This is my fourth time coming out here, we responded to the RFP, we've done a lot on behalf of the county and on behalf of the legislative body and all in good faith.
As far as hiring an intermediary versus doing it yourself, you know, we, as I told you before, kind of about our qualifications, we have a very broad reach. We have a database of about 15,000 to 18,000 related parties. We are non-political in nature, so our only obligation is to the county and by saying that I mean that our only objective is to get the county the highest price with the tightest terms for a transaction and the most favorable conditions for the sale related to not only the county from the monetary standpoint, but to also the residents and the employees.
We have a full-time focus, so this is all we do.
My partner and I are two of the senior members in the firm. We've already closed $240 million in transactions this year ... just our team in the last 16 years... The timeliness, we work non-stop as I'm certain some of the people that we've spoken with know and, y'know, we work very hard.
Proceeds From Sale:
As far as the benefits of selling, as it stands, it goes a lot further than just selling the facility. There are a lot of ancillary costs that are associated with a sale or with a hold.
From a cost-benefit or a benefit of sales now, you could realize as much as $60 to $65 million -- and I'd be more than happy to go through that right now.
You'd have net proceeds from the sale, which are approximately anywhere from $10 to $13 million after you pay your debt service. Our valuation for the facility is approximately $20 million. Annual income tax and other taxes associated besides property taxes would be about $2.5 million over a 10-year period.
Property tax income: A nursing home of this size generating this type of revenue would approximately bring in about $300,000 to $400,000 a year in property taxes. That's not to mention, whoever did buy, if you chose to go that route, if they added an assisted living component, memory care, independent living, that would bring in whole other questions and benefits.
Annual operating loss over a 10-year period: Next year the operating losses are projected to be $3.5 million dollars. I'm sure based on looking at it historically and going forward and also knowing what's happening with health insurance premiums, pre-pension benefits, pre-retirement pension obligations and other costs associated with running the facility, next year is $3.5 (million) it could very well increase or at least stay status quo. So I would see that as a $35 million benefit over 10 years.
And then, additionally, bond rating risks. If you have a property that is performing poorly and you're subsidizing it year-after-year it could affect bond rating. I'm not a specialist on that, but that is something that we've heard from others.
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Joshua Jandris, of Marcus & Millichap, addressed the County Legislature on Wednesday.