By Thomas J. Sullivan–
The owners of the Auburn Oaks Senior Living Apartments at 7501 Sunrise Blvd. are seeking a buyer willing to pay $8.5 million for 48 senior apartments and 80 units of currently non-operational assisted living space that could be re-opened.
Auburn Oaks was built on a 3.4-acre parcel in 1977 and was operated as senior apartments and assisted living until the market collapse of 2008. Since that time, only the senior apartments have remained operational.
Bruce Wirt, senior vice president, and partner Ben Frazier, vice president of Kidder Mathews in Sacramento, are the listing agents for the property.
Wirt said he’s hoping the asking price of $8.5 million will attract a new buyer who sees the overall investment potential the property offers. But so far, no offers have been made.
“It’s been on the market since August,” Wirt said. “We’ve had some inquiries, but no offers yet.”
In its listing brochure, new owners of Auburn Oaks could realize $4.3 million in gross potential rent from the senior and assisted living rents. Senior apartment vacancy rate at Auburn Oaks is holding at 5 percent.
The apartments are managed by the Sacramento-based Cimino Care. Wirt said Cimino Care would be willing to assist a new investor with the renovation and management of the Assisted Living business through fee management or lease.
Whether Auburn Oaks is completely converted to exclusively affordable senior apartments or re-opened in the current configuration with the 80 units of re-opened assisted living space would be entirely up to the potential buyer, Wirt said. In all, a new investor could quickly renovate and bring to market over 100 beds of senior care, he said.
“An investor has the opportunity to re-establish a senior housing facility in a prime location without incurring the expenses associated with ground up construction,” Wirt said. “The physical skeleton is in place at half the cost it would take to build today,” Wirt said.
Wirt estimated that it could cost between $500,000 and $700,000 to make the necessary improvements to the 80 units of non-operational assisted living space. Construction of a modern commercial kitchen is also needed, he said.
“Everything is in place to bring much-needed affordable senior housing to Citrus Heights with the right buyer,” Wirt said. Overall interior cleanup of the site’s unoccupied assisted living spaces is continuing.
“The assisted living spaces are being cleared of outdated furnishings and furniture which have been in place since that side of the facility closed,” Wirt said. “We’re looking for an imaginative buyer who sees the great potential this site offers.”
The $8.5 million asking price calculates at approximately $65,891 per unit at $137.77 per square foot. Auburn Oaks is listed with a market capitalization (CAP) rate at 14.62 percent.
The Capitalization Rate or (CAP) is the ratio of net operating income to property asset value. The CAP rate shows the potential rate of return on a proposed commercial real estate investment, with a higher rate better for the buyer.
According to Senior Living Investment Brokerage, commercial properties may bring a four percent CAP rate in high demand areas, or a rate of more than 10 percent in low-demand areas. The brokerage says CAP rates are typically higher for senior apartments, “because an investor is buying the real estate and the operating business instead of just the real estate, as is the case for apartment buildings and commercial real estate.”