PE-backed Ark Holdings Buys HMR Advantage Health

Ark Holdings Inc., which owns skilled nursing homes, has acquired HMR Advantage Health Systems, a South Carolina-based owner and operator of long-term care centers. The deal was valued at $143.8 million. Ark Holdings is backed by Behrman Capital. HMR provides post-operative therapy to long-term skilled nursing. The company has 21 centers across South Carolina, North Carolina and Georgia. Behrman Capital established Memphis, Tenn.-based Ark Holdings in July 2007.

PRESS RELEASE:
Behrman Capital announced that its Ark Holdings Inc. platform of skilled nursing homes has acquired HMR Advantage Health Systems, a South Carolina-based owner and operator of long-term care centers, for a total consideration of $143.8 million. Through the transaction, which closed on December 29, 2010, Behrman also acquired a hospice company, Hallmark Hospice, previously owned and operated by HMR.

Founded in 1994 and headquartered in Easley, South Carolina, HMR provides post-operative therapy to long-term skilled nursing. The company has 21 centers located in South Carolina, North Carolina and Georgia.

Behrman Capital established Memphis, TN-based Ark Holdings in July 2007 through its acquisition of Covenant Dove Holding Company, LLC for approximately $250 million. Since that time, Ark has continued to execute a build-up strategy in the post-acute care sector with several smaller scale acquisitions, including the operations of 7 facilities formerly managed by Mariner in January 2008 and 3 Texas-based facilities owned by Sulik Healthcare Services in June 2008.

Following its acquisition of HMR, Ark will own and operate one of the largest privately held platforms of skilled nursing facilities in the country, with 59 homes and more than 6,000 patient beds.

Larry Deering, Chairman of Ark Holdings, is a Behrman Capital Operating Partner. He previously served as Chairman and CEO of Tandem Healthcare, a former Behrman Capital portfolio company. During Behrman’s 8-year ownership, Tandem’s revenues and profitability grew from $25 million and $3 million, respectively, to more than $550 million and $84 million.

Ark’s acquisition of HMR was primarily financed by Walker & Dunlop, utilizing the U.S. Department of Housing and Urban Development’s 232/223(f) loan program, which provides low-interest-rate, long-term financing with flexible prepayment options and no financial covenants. In addition to the HUD financing of $104.7 million, Capital Source also provided a 5-year $35 million revolving credit facility. The loans were underwritten to a 2.60 debt service coverage with occupancy greater than 90%.Walker & Dunlop, a Bethesda real estate finance firm that recently went public, closed on a $104.7 million loan allowing the Ark Holding Co. to acquire a portfolio of 18 skilled nursing homes in South Carolina, North Carolina and Georgia. The financing was Dunlop’s second for more than $100 million for nursing homes. In August, Walker & Dunlop financed a deal for 16 facilities in Florida. In August 2010, the company funded a 16 facility refinance of the IBHSAR facilities in Florida for $162.2 million.