Investment Group Buys 49.9% Stake in ARV of O.C.
An affiliate of New York investment bank Lazard Freres & Co. agreed to pay $135 million for a 49.9% stake in ARV Assisted Living Inc., the rapidly growing operator of homes for the frail elderly.
An official of Lazard Freres Real Estate Investors LLC said it’s making the investment because it expects that the company’s industry will experience “explosive growth.”
The money invested will fund the Costa Mesa company’s acquisitions and growth in an effort to position it for future industry consolidation.
The Lazard affiliate will acquire its stake through the purchase of newly issued ARV stock at $14 per share, 23% above ARV’s closing price Monday. The stock rose 13 cents Monday to close at $11.38 in trading on the Nasdaq market.
Lazard will add four members to ARV’s seven-member board.
ARV is among a number of companies that have gone public in the last several years to finance expansion plans in “assisted living” homes--a market that some Wall Street analysts expect will grow with the graying of America.
However, ARV, like its competitors, has struggled to make money thus far. And it has waffled strategically, first planning to shed its division of apartment management, then deciding, instead, to restructure its operations.
The company, which went public in October 1995, reported a net loss of $1.8 million, or 19 cents a share, on revenue of $83.9 million for the fiscal year ended March 31, compared with a net loss of $965,000, or 21 cents a share, on revenue of $33.1 million the previous year.
It operates 48 facilities in the U.S., including more than 6,000 units. Assisted-living facilities provide in-home meals, transportation, medication and medical services for healthy but elderly residents in apartment-like settings.
“We’ve liked the base they’ve established and where they are headed,” said Robert Freeman, head of Lazard Freres Real Estate Investors LLC.
Freeman declined to project ARV’s growth, but said his company will be “very disappointed” if it doesn’t outpace an expected near tripling of the industry by 2000.
ARV officials could not be reached for comment.
