New owner of 11 assisted-living facilities in the Northland plans to add moreThe local owners of Keystone Bluffs in Duluth and all 10 Diamond Willow assisted-living facilities in northern Minnesota have sold the properties to East Coast buyers for $51 million.
By: Candace Renalls, Duluth News Tribune
The local owners of Keystone Bluffs in Duluth and all 10 Diamond Willow assisted-living facilities in northern Minnesota have sold the properties to East Coast buyers for $51 million.
Northstar Realty Finance, based in Bethesda, Md., purchased the facilities in a series of deals that wrapped up recently. It will, in turn, lease the buildings to Meridian Senior Living, which will operate the 11 sites.
They plan to expand with more locations, creating hundreds of jobs.
Meridian, also based in Maryland, operates 104 assisted-living facilities in 14 other states, but had none in Minnesota and wanted a presence in the state.
“We’re so very excited to be in Minnesota and to now have an office in Duluth and to have taken on these properties,” said Dan Castleberry, Meridian’s executive vice president of acquisitions and development. “We’re excited about being in this area, excited for the growth that we will have.”
All 430 Diamond Willow and Keystone Bluffs employees will keep their jobs, while the 450 residents should see no change in their care or costs, he said.
“Basically, it will be business as usual,” said Natalie Zeleznikar, the former CEO who was part of the local ownership group. “We will keep the same type of staffing as we have now, the same wages, everything. We’re going to continue as we have done before.”
Diamond Willow and Keystone Bluffs are a well-performing business, according to Rob Link, a principal with A&L Properties, which was the majority owner.
That did not escape the buyers.
“We were able to take on an already proven, stable product in secondary markets where Meridian does most of its work,” Castleberry said. “So this portfolio fit extremely well in that mode.”
Keystone Bluffs opened in 2000 at 2528 Trinity Road in Duluth with 80 apartments in serene surroundings with central courtyards. The first Diamond Willow facility was built in Proctor a few years later to offer similar, but smaller, homelike settings for seniors who need advanced care for memory, physical and other medical issues. Other Diamond Willow sites followed in Cloquet, Grand Rapids, Mountain Iron, Baxter, Detroit Lakes, Park Rapids, Little Falls, Alexandria and Duluth.
“Meridian has models that are similar to the Keystone model, but they don’t have the Diamond Willow advanced-care model,” Zeleznikar said. “So they’re interested in seeing how we do it to better serve seniors that are aging in other assisted-living facilities.”
“We want it to look just like Grandma’s home,” he said. “It can’t be her home, but we want it to feel as much like home as possible. What Diamond Willow has done is exactly what we’re looking for. Some of these folks are at the end of their lives. It gives comfort to them and to their families.”
Average costs at Keystone are $3,200 per month, including meals, laundry, activities and shower and other assistance. With its advanced care, Diamond Willow costs an average of $5,500 per month. That’s similar to the $5,000 to $7,000 average cost for a shared room in a nursing home in Minnesota, Zeleznikar said.
Meridian is looking to expand in the region with 10 to 20 more Diamond Willow facilities in the next five to 10 years. With 30 to 60 employees at each site, that would be 300 to 1,200 new jobs, Castleberry said.
“The upper Midwest has been a wonderful place for us,” he said. “We have 16 in Illinois, eight in Ohio. And we want to grow in Minnesota, Wisconsin.”
All will continue the model of small 20-unit facilities with homelike settings, providing a high level of care for residents with advanced needs.
First up will be a new Diamond Willow facility in Fergus Falls and a Diamond Willow to be built 100 feet from Keystone Bluffs in Duluth, both on land that was part of the purchase deal.
A&L Properties, which built the 10 existing Diamond Willow facilities, has an agreement with the new owners to build up to six more in the next three years, Link said.
A&L getting out
The sale was a result of A&L deciding to get out of the health-care business and reduce its real estate holdings, Link said.
“The business for us had gotten too big, and it’s not our core business,” Link said. “We’re in the real estate and construction business, not health care. It’s too big for us to stay involved.”
Link said the sale was in the works for nine months because dealing with a health-care business is complicated. Moreover, each property had to be negotiated separately and handled in different counties, and each resident’s lease re-drawn, Link said.
Diamond Willow and Keystone Bluffs never were officially listed on the market. But word got out through a broker in Chicago that the holding company was interested in selling.
“There were probably 14 or more companies across the country who were very interested in our care model,” Zeleznikar said.
Several made offers, but Meridian’s offer was the best one, she said.
The properties and businesses sold for a total of $51 million, Castleberry said. Link said that provided a good profit for the sellers. It came down to $158,000 per bed, which is 25 percent above the national average, he said.
But more was involved than money, said Zeleznikar, who had co-founded Diamond Willow in 2004 so her grandmother would have a safe, homelike setting in which to live and receive care for her advancing needs.
“Their philosophy better matches our philosophy,” she said of Meridian.
Moreover, Meridian agreed to keep the staff and their wages and vacations in place and to provide her with the resources she needed to continue operating the facilities with the same level of care, said Zeleznikar, who will continue on as Meridian’s vice president of operations for Minnesota.
“We will now be owned by a company that has 100 percent focus on seniors and senior health initiatives,” she said.
And that’s good, she said.
She said she won’t miss being an owner.
“For me, I’m happy to be 100 percent on the operations side,” she said. “It’s been an honor being an owner, but my passion is in operations. And that’s what I’ve done the last 20 years in my professional career.”