How to Sell Assisted Living Facilities Faster (part 2 of 2)

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Deciding when to sell your assisted living facility (Independent Living Community or skilled nursing facility) can be a daunting task and there are many factors to consider.   However, once an owner decides to sell, typically they want to close as quick as possible.   As a company, Senior Living Investment Brokerage, Inc has sold more senior living and skilled nursing facilities than any other brokerage company over the past seven years.  Over the years, we have found a number of things an owner can do to help sell their senior housing community faster, below is the second half of our top six things to do to sell your facility faster:

4. Have your attorney get a preliminary title report when you list the property – After an offer has been accepted and the buyer is going through their due diligence period, title issues can often cause delays in closing. If a property has been owned for a long time, and no recent debt has been placed on the property, the title probably has not been reviewed by an attorney for years.  Old liens, mortgages, improper zoning are just a few issues that could come up.   By having an attorney review a title policy early on in the process, many of these issues can be resolved prior to the buyer’s attorney examining the title policy.

5. Have an ALTA survey completed ahead of time – An Alta survey, in conjunction with an attorney review of the title policy can help reduce possible delays in closing. A survey can reveal encroachments, easements and other issues on the site that a buyer may or may not have an issue with.   Having a survey that is already completed that a seller can show to a potential buyer will save time and make the closing process go smoother.

6. Fix any major capital items – All buyer’s will perform some type of building inspection and expect that the roof, foundation, mechanicals, etc are in good working order. As a seller, if you know there is something that needs to be fixed, it makes sense to do it ahead of time and not wait and hope a buyer won’t find it.

Many of the above suggestions will cost the seller both time and money ahead of time.  The seller must weigh the risk of spending their time and money with helping the closing go quicker.  Ultimately, if the seller is committed to selling, these expenses will be a good investment to ensure the smoothest closing possible.

For more information on selling your seniors housing property, please contact Jason Punzel at 630-858-2501 x 233 or [email protected].

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How additional sources of funds are impacting the seniors housing market

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Over the past couple of years, we have seen capitalization rates (defined as Net Operating Income divided by Purchase Price) drop steadily to historically low levels, which in turn has led to purchase prices being driven upwards.

Now is the time to take advantage of this market and either exit the business through a sale entirely or divest of a few properties from your portfolio that do not fit with your current strategy.

Why is the market so strong right now?  More so than any other factor, the market has been impacted by the increased availability of capital (both debt and equity) and the low cost nature of said capital.  Interest rates are still at historically low levels, and while rates may creep up a bit, most analysts expect a measured increase.

During the Great Recession, transactions were mainly financed by three different methods: (1) all cash; (2) HUD financing; or (3) mostly public REIT financing.  Community banks were only lending to their best clients on the most conservative of terms, and there were not a great deal of smaller, private REITs or private equity firms willing to support the acquisition of seniors housing facilities.

Over the past couple of years, community banks have become more aggressive as they are sitting on a large reserve of cash that they need to deploy and there has been a growth in the private REIT space.  According to investment banking firm , Robert A. Stanger & Co., and reported by Seniors Housing Business, a handful of non-traded REITs devoted to seniors housing have amassed $6.4 billion in equity over the past few years.  The availability of these capital sources has had a huge impact on the seniors housing acquisition market in the form of increased pricing.

The most recent example of this was a $30M nursing home portfolio that Senior Living completed in Texas.  It was purchased by an independent, regional owner-operator and financed by a community bank out of Louisiana.  Until recently, that size of transaction would have been almost certainly REIT financed or purchased by a large, national owner-operator.

If you have any questions on the topic of this post or would like a confidential valuation of part or all of your seniors housing portfolio, please contact Matthew Alley at 630-858-2501 ext. 225 or [email protected].

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Seniors Housing – Small buildings vs. Large buildings

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As a company, Senior Living Investment Brokerage Inc, sells all types of senior living and long term care communities.   One type of senior living community type we are seeing more of is the “pod” style of smaller buildings grouped together on a single parcel of land.   Thus, instead of having one 80 unit facility, there might be five, sixteen unit facilities with one of the facilities being a bit larger where more of the community activities take place.  There are some advantages and disadvantages to them.   We find that often times residents like the feel of the smaller facilities because they feel more like a home and it is easy for them to get to know the other residents.   From a marketing/occupancy standpoint, these types of facilities also seem to be attractive and often times enjoy very high occupancy.

The biggest disadvantage is staffing and efficiency.  Depending on the state and acuity level, often times these smaller facilities require a staff person to be in each facility 24 hours a day.   For only 12-16 residents, this can be very inefficient and costly.  Also, while each facility usually has its own kitchen, it can be very inefficient to have a cook in each facility or to cook in one facility and have to transport to the other facilities.   We often find that this type of community set up operates at an operating margin around 25% while a similar age/acuity level facility that has all of the residents under one roof might operate at a 32-35% margin.  Thus, it limits that maximum amount of cash flow a community can create, decreasing its value.   However, smaller facilities can be more attractive to residents and thus have great occupancy, some of the cash flow deficit may be eliminated.  While we see more buyers prefer the larger facility communities, both styles can be very effective in delivering great resident care and producing profitable returns for the owner.

To have Senior Living Investment Brokerage, Inc. help you analyze the value of your senior living community, contact Jason Punzel at 630-858-2501 x 233 or [email protected].

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