Kandu Capital, LLC Announces Sale of Skilled Nursing and Mental Health/Psychiatric Facilities Throughout California to Further Focus on Seniors Housing

Birmingham, Michigan (March 24, 2023) - Kandu Capital, LLC (“Kandu”), the real estate and health care-focused family office, and principals of Bloom Senior Living (“Bloom”) today announced the divestment of their remaining legacy Skilled Nursing and Mental Health/Psychiatric facilities located throughout California.

Following the strategic sale of four seniors housing communities in 2021 for nearly $37 million on initial investments of approximately $15 million, the family now sold: a 255-bed Skilled Nursing / Special Treatment Program facility in Santa Ana; the leasehold in a 80-bed Mental Health rehabilitation center in Mission Viejo; and a 45-bed Skilled Nursing / Special Treatment Program facility in Los Angeles. The collective purchase price was $70.7 million on initial investments of approximately $9 million.

Like the seniors housing sales, the California facilities had a modest ~$6 million mortgage, which is consistent with Kandu’s conservative capital structures that have served the family business well over the course of multiple decades. In aggregate, Kandu has realized proceeds of nearly $108 million since May 2021 on initial investments of approximately $24 million with ~$15 million of debt leverage.

The Kandu principals stated “these are bittersweet transactions given the unique facilities have been in our family for generations and we have an emotional connection to the Counties we worked closely with for decades, the specialized programs we helped engineer and our dedicated staff who tirelessly served our patients. These facilities have also been an instrumental part of our family story, laid the groundwork for Bloom Senior Living, and serve as the model for our next chapter.”

For those that follow the Bloom Story, they know our Skilled Nursing and Mental Health business started in 1963 when a dissatisfied middle-aged accountant, Richard Tischler (Bloom’s Chief Inspiration Officer), started his second career after seeing Medicare on the horizon. Using everything he could scrape together, he and a client made a handshake deal and built Arizona’s largest nursing home. But shortly after, Medicare rules changed and the Tischlers were on the verge of bankruptcy. Richard’s tough upbringing, depression-era mentality and focus on family helped him save the business.

By convincing his son-in-law, Mitch Kantor, to join the business in 1974, Richard and Mitch expanded in Arizona and then into Santa Ana, California by diversifying into Mental Health / Psychiatric with specialized programs for indigent mental health patients. Richard would later remark this was one of the crowning achievements of his life — not only because Mitch would help him grow the company, but also because it marked the beginning of a true family business; a dream he never imagined decades earlier while living in the Harlem slums. Richard and Mitch, working together, paved the way for Bloom 30 years later. In 1982 and 2001, Richard and Mitch further expanded the Mental Health programs into Los Angeles and Mission Viejo, California.

By 2003, Richard and Mitch turned down an opportunity to take the company public, wanting it to remain a family business. They stressed the importance of doing it their own way, making their own decisions, and running a business guided by their long-term vision and values. Richard and Mitch were true to their word and treated every one of their hard-working associates like family – their team would be with them for decades.

After Richard’s wife, Ruth Tischler, was diagnosed with Alzheimer’s in 2007 and the family couldn’t find the right fit for her care, the brainstorming about Bloom began. Inspired by this personal mission and building upon the family’s experience, they saw an opportunity to shift the focus from Skilled Nursing and Mental Health to Independent Living, Assisted Living and Memory Care; the same Lifestyle Options Ruth required. They also realized there was a chance to incorporate a more modern, lifestyle approach into senior living communities – making them feel more like home while providing an environment where residents can continue to learn, grow and discover. Bloom was born.

With Richard’s support, the third generation gave up careers in banking, law, and real estate to take a risk, just as Richard and Mitch did years earlier. They promised Richard that the beliefs which guided his long career would drive the business, while always keeping Ruth’s experience in mind. They sold the Arizona nursing homes, purchased a portfolio of seniors housing, and built Bloom into a differentiated, culturally driven and mission-based company.

While the decentralized “mom and pop” model of the legacy business is very different from today’s Bloom, they are both driven by an incredible feeling of togetherness and care. The family then, like now, is guided by a depression-era philosophy of living frugally so whatever funds generated can be reinvested into the business; running the company with little debt and without partners or investors; and making decisions guided by a long-term vision of what’s best for the business, residents and associates.

The Next Chapter

Continuing to focus on seniors housing and growing Bloom, with the values of the legacy business, is what comes next for this family office.

Bradley Dubin, Kandu’s/Bloom’s Principal, remarks “while it was difficult to sell the last piece of our legacy business, the timing appears fortuitous. We top-ticked skilled/behavioral valuations—with our largest owned facility trading near $225,000 per bed—at a moment when we are seeing more opportunistic seniors housing deals than ever before due to the current environment. We now have more resources to deploy into the space using the Bloom brand, and the current market dislocation provides us with a unique opportunity analogous to the last recession. While others may be playing defense, we are excited to play offense and run the same growth playbook that worked for our family during past down cycles. The fact that we are both the capital provider and operator makes us the ideal purchaser for these personal businesses. We are seeing positive fundamentals and trends outpacing pre-pandemic levels and the industry in our current portfolio. In fact, Bloom communities hit a new high watermark for occupied units and rates in 2022. With accelerating demand, pricing power, slow inventory growth and high absorption suggesting a historic demographic shift underway, seniors housing, at least for high quality operators, is headed above the peak occupancy, profitability and valuation levels of 2014/2015.”

Bloom continues to be well positioned. With a scalable operating platform, portfolio of core, stable assets near 95% occupancy with record rent and net operating income growth, strong balance sheet and robust pipeline of new opportunities, Bloom will focus on operating its existing seniors housing communities consistent with its differentiated mission, Bloom Beliefs, brand, education and culture while looking for new communities to stabilize.

CapM Advisors, an independent mergers and acquisitions advisory firm based in New York, served as financial advisor to Kandu on the aforementioned sale transactions.

Sternshein Legal Group, a law firm specializing in long-term care and seniors housing based in California, and Honigman LLP, a business law firm based in Michigan, served as legal advisors to Kandu on the aforementioned sale transactions.

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