Private-equity firm buys 29 Iowa nursing homes in massive $85 million deal

The sale of one of Iowa’s largest nursing home chains has reportedly been completed, with 29 care facilities now in the hands of a private equity firm.

According to Skilled Nursing News, the real estate brokerage firm of Marcus & Millichap says the $85 million transaction represents the largest nursing home sale ever recorded in Iowa. The 29 facilities represent 7% of the 410 nursing homes operating in Iowa.

The sale involves the transfer of care facilities previously owned by one of Iowa’s largest employers, ABCM Corp. of Hampton, to the Chicago-based private equity firm Cascade Capital Group.

According to a statement that Marcus & Millichap provided Skilled Nursing News, the final sale price of $85 million equates to $36,000 for each of ABCM’s 2,346 skilled-nursing beds and 326 assisted living units.

In recent years, the acquisition of nursing homes by private equity investors has come under scrutiny by regulators,the mediaand members of Congress, with critics suggesting too many profit-minded investors target care facilities for acquisition, starve them of cash while collecting a reliable stream of income from Medicare, and then cash out.

In 2023, the Government Accountability Office reportedthat federal data shows at least 5% of nursing homes nationwide were owned by private equity firms – but the GAO cautioned that the data was flawed and the true number is likely higher.

In March, the Federal Trade Commission and U.S. Department of Justice opened inquiries into the effect of private equity investment in hospitals and nursing homes.

Richard Allbee, the head of ABCM Corp., declined to discuss the sale with the Iowa Capital Dispatch. Court records indicate that in 2023, the company employed more than 3,000 individuals.

The transaction had been anticipated for several months. In July, officials at ABCM informed its employees and residents that the company had filed change-of-ownership papers with the state. At the time, ABCM, a for-profit company, indicated its operations would be taken over by an affiliate of Legacy Healthcare.

Legacy Healthcare is an affiliate of Cascade Capital, which has ties to more than 300 care facilities in 19 states. Typically, Cascade acts as owner and landlord of the properties, while Legacy acts as the renter managing the care that’s being delivered by the homes.

The 29 homes involved in the sale are located in the Iowa cities of Allison, Aplington, Armstrong, Battle Creek, Belmond, Bloomfield, Britt, Clear Lake, Elma, Emmetsburg, Garner, Guttenberg, Hampton, Independence, Indianola, Lake Mills, Lisbon, Mason City, Morning Sun, Mount Vernon, Nevada, Nora Springs, Sac City, Sigourney, Waterloo, Waukon and Webster City.

In addition, the deal includes two facilities in Oelwein: the Oelwein Health Care Center and the Grandview Health Care Center. The Morning Sun facility closed on Sept. 9, 2024.

State keeps financial, business data secret 

Justin Knapp, first vice president of investments for seniors housing at Marcus & Millichap, told Skilled Nursing News the deal was initially expected to close late last year, but financing and regulatory issues led to delays.

Under a state law that was approved in 2023, nursing home buyers in Iowa must submit to the state documentation showing they have sufficient capital on hand to meet the needs of residents before they can be licensed.

The new owners must also disclose their relationships to any related corporations and provide details of their projected revenue and expenses. Typically, they also must show evidence that they have enough money on hand to cover at least two months of operating expenses, or they must establish an escrow account with that amount of money held in reserve.

When asked whether the Iowa Department of Inspections, Appeals and Licensing imposed such requirements on the buyers of the ABCM facilities, a department spokesperson said only that it followed the requirements of Iowa law, “which includes a robust financial analysis.”

The spokesperson noted that under state law, all of the information a buyer provides to the state related to their business relationships and their compliance with the new financial regulations are treated as confidential and are not subject to public disclosure the state’s Open Records Law.

Allbee, who owns 100% of ABCM Corp., has been politically active in Iowa, regularly donating tens of thousands of dollars to Republican campaign committees and industry lobbyists. Since January 2021, he has personally donated $82,950 to various campaigns and political action committees.

Read more from Clark Kauffman online at IowaCapitalDispatch.com

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