Monthly Archives: October 2016

October 28, 2016
Brad Goodsell

What Does Confidential Senior Housing Listing Really Mean?

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Specific to the seniors housing market, confidential, is a common term used throughout the transaction process.  But what should, or more importantly does confidential really mean, during the course of a senior housing listing and subsequent sale?

Most seniors housing brokers will make some mention of how they work confidentially to market a listing, however reality is often a very different case, varying greatly by broker and brokerage firm.  An example of this is often found on websites featuring a brokerage’s listings…listing a ‘confidential’ property on a website.  Yes, you read that correctly!

Another example of a seniors housing listing confidentiality breach, is that of mass-marketing a property through email.  I know firsthand that this happens, why, because I am the recipient of many such emails.

When considering selling a senior housing property, each seller should consider their level of appetite for news of the pending sale reaching the local community, greater marketplace, residents and existing staff.  As such, true confidentiality ought to be expected and required.  With this in mind, Senior Living Investment Brokerage (SLIB) takes a unique approach, holding fast to true confidentiality in each senior housing listing process.

At SLIB our process is truly confidential, from start to finish.  It begins with initiating personal phone calls, not emails, to gauge interest of financially qualified buyers by providing a generic property description.  If interested, prospective buyers are then forwarded a confidentiality agreement.  Only upon receipt of this signed agreement does Senior Living Investment Brokerage disclose full property details.

While our approach takes more time and effort, it has proven over time to be more effective, while also keeping the integrity of our relationships paramount.

Closing

In the world of senior housing listings and transactions, confidential, can mean many things to many people.  It is up to seller to confirm their chosen brokerage’s approach to this essential issue.

Contact Information

To discuss how we can assist you with the sale of your Senior Living Community, contact Brad Goodsell of Senior Living Investment Brokerage, Inc. at 630-858-2501 or goodsell@slibinc.com.  We are available to prepare a no obligation property valuation analysis for you.

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October 26, 2016
Matt Alley

Private Healthcare REITs are Still Active Buyers

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Private Healthcare REITs are Still Active Buyers

As Ryan Saul blogged in July (http://seniorlivingbrokerage.com/reit-buyers-quiet/) and Senior Housing News commented on this week (http://seniorhousingnews.com/2016/10/19/senior-housing-ma-continues-decline/), Seniors Housing M&A activity has dipped over the past couple of quarters due to decreased activity among the majority of Public Healthcare REITs.

According to Bill Kauffman, NIC’s senior principal, the main reason that the transaction market has slowed “has been the drop in buyer volume from the publicly traded companies – mainly the three big REITs (Ventas, Welltower and HCP).”

How does the Public Healthcare REITs Slowing Down Affect Asset Pricing?

For the large institutional level portfolios, this could impact the pricing and capitalization rates as cost of funds have increased for Public Healthcare REITs.

For the Single Facility and Small Portfolio Owners, There is Good News.  

With likely Buyers of single facility and small portfolios (Private Healthcare REITs and owners), there has been a transaction volume in the 3rd quarter of 2016 of over $1 billion for the 13th quarter in a row.  According to Kauffman, “there is a large amount of private capital searching for yield given the continual low interest rate environment”.  Private Healthcare REITs and owners are still active buyers.

If you are an owner of a single facility or small portfolio, now is a great time to consider selling your asset(s).  The Private Healthcare REITs and Owners are still aggressively pursuing assets like yours.  I would be happy to prepare a complimentary confidential marketing proposal of your facility or portfolio.

At Senior Living Investment Brokerage, Inc., we have a long track record of independent seniors housing sales and serving the needs of independent owner-operators.  We have completed several transactions recently for single facility and small portfolio operators.

If you have any questions on the topic of this post, please contact Matthew Alley at 630-858-2501 ext. 225 or alley@slibinc.com or http://www.matthewalley.com

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October 17, 2016
Jason Punzel

Moderate Income Assisted Living

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Moderate Income Assisted Living by Jason Punzel

There tends to be a trend in new construction of seniors housing communities to focus on very high end Private Pay residents that have the ability to pay $4,000+/month for independent living and $6,000+/month for assisted living.  Additionally, many older communities have a high percentage of Medicaid residents and thus focus on keeping costs and capital projects to a minimum while keeping occupancy high and still providing needed services to their residents.   However, there seems to be a hole missing in the marketplace servicing moderate income assisted living Private Pay residents who have the ability and desire to pay a moderate monthly amount, without the highest end amenities.

Today, construction costs average close to $200,000/unit in seniors housing, not including land.   Including land, construction costs can easily top $300,000/unit or more in “high barriers to entry markets” where land costs are at a premium.  However, often times as brokers, we sell nice facilities in the suburbs that may be struggling a bit with occupancy for $100,000-$150,000/unit.   These facilities are typically 10-20 years old and may have been the nicest facility in the market place when they were built, but are now caught in between high-end Private Pay communities with all of the latest amenities and much older Medicaid communities.  A solution may be to focus on moderate income assisted living residents.

If the newest communities are charging $6,000/month and Medicaid reimburses at $2,500/month, a moderate income assisted living community may decide to charge an average of $3,500/month.  With a cost basis of $120,000/unit, with high occupancy, this community should be able to operate at very solid gross margins and still provide nice services and care levels for its residents.  The key would be to target those residents that don’t have the ability or desire to live in the newest community with all of the latest amenities, but are happy with a nice community, a private room and bath, with a reasonable amount of activities.  While new capital projects would be kept at a minimum, the owners would focus on maintaining the building at its current level.

Conclusion:

While it would be difficult to develop new communities that would focus on moderate income assisted living, there are many facilities that are 10-20 years old that could be bought for a much lower cost per unit.  If these communities are run efficiently with high occupancy, they could do a very good job of serving the moderate income assisted living market and still be profitable for their owners.

Contact Information:

For more information on how Private Pay vs. Medicaid residents affect the value of your community, contact Jason Punzel at 630-858-2501 x 233 or punzel@slibinc.com.Sunnyhill

October 6, 2016
Ryan Saul

Will Labor Effect Seniors Housing?

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Will Labor Effect Seniors Housing

Will Labor Effect Seniors Housing? My guess is the answer is yes. Labor shortages is a real challenge for Seniors Housing operators. I’m hearing more and more that agency and temp workers, which is costly, is becoming standard in most buildings.  I can’t get through a discussion about buying or selling without labor being brought up.  Job gain has been strong across the country.  Unemployment is hovering around 4.9%.  It is getting increasingly difficult for Seniors Housing Owners to find and attract quality employees.  It isn’t just the care givers.  It is difficult to find and retain quality executive directors and department heads.  While the front line workers are the key to success, it starts with quality leadership.

Ways operators are overcoming the labor challenges

Owners are targeting more experienced workers.  Many of them could retire, being vested or having retirement savings secure.  However, they love what they do and have more experience than anyone.  Owners are finding ways to bring those individuals in a leadership or ownership sharing capacity.

Many are offering retention bonuses for front line, entry level positions.  The longer employees stay with less turnover, the more owners are saving money.

Bottom line not hurting yet

Thankfully, wages have not increased with reduced unemployment. This is more true for front line, entry level positions.  This is primarily due to older. more experienced workers retiring and being replaced by younger, cheaper labor.

What does this mean for you?

There is no doubt that labor is going to be a challenge for many years to come.  If you have thought about selling nursing home or selling assisted living now is the time.  Take advantage of the great market with low interest rates and capital available.  Everyone is waiting for the shoe to drop on the market.  Act now before that shoe drops.

Contact Ryan M. Saul, Managing Director at Senior Living Investment Brokerage, Inc. for a confidential proposal or to discuss the market in general.