Sanford Health is selling the portfolio of more than 40 affordable housing facilities it acquired through its 2019 merger with Evangelical Lutheran Good Samaritan Society.
California Commercial Investment Group, a Westlake Village, Calif.-based acquisition, asset management and development firm, has signed a letter of intent to buy the health system's 42 facilities across 18 states. The deal will close on a rolling, location-by-location basis throughout 2021. The parties did not share the proposed price.
Not-for-profit Sanford disclosed in a recent financial statement that its affordable housing division, which includes 1,700 mostly U.S. Department of Housing and Urban Development-funded units, loses $1.8 million on operations annually, and selling them will erase $33.6 million worth of debt from its balance sheet. Sanford's operating income jumped 88% year-over-year to $291 million in 2020. Revenue grew 7% year-over-year to $6.7 billion in 2020.
"To be successful at affordable housing, you need scale," said Eric Vanden Hull, vice president of finance for the Good Samaritan Society, which is now part of Sanford. "Seventeen hundred units may sound like a lot of units, but compared to some of these bigger ones, it's pretty small. We just didn't have the unit scale."