Seniors Housing Business

AUG-SEP 2018

Seniors Housing Business is the magazine that helps you navigate the evolution of the seniors housing industry.

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60 www.seniorshousingbusiness.com Seniors Housing Business n August-September 2018 Pat Byrne Pat Burke $5 BILLION IN SALES TRANSACTIONS 860 SOLD SENIOR HOUSING COMMUNITIES 1997-2018 Grant A. Kief, President (630) 858-2501 (314) 961-0070 www.slibinc.com Jason Punzel Matt Alley Jeff Binder Ryan Saul Jeff Clousing Nick Cacciabando Dan Geraghy Kyle Shoemaker Dan Piatkowski Brad Clousing Toby Siefert Dave Balow Brad Goodsell Our experts will help you get a "Top-of-the-Market" price for your Seniors Housing community. Teamwork = Results We have 17 seasoned professionals that are national experts in the Seniors Housing and the Affordable Housing market. Together we have over 175 years of experience. Contact us for a confi dential valuation of your Seniors Housing community. Vince Viverito Joe Young been relatively level, but for certain asset classes pricing has slightly decreased. This includes more rural, smaller and older assets. Firestone: We are in a similar spot as interest rates have remained relatively constant, debt and equity markets flush, and new construc- tion continues to charge ahead despite underlying occupancy rates. This tells me that market believes in long-term absorption and demand drivers. Carriero: I still see a lot of activ- ity in the market. However, I also notice that buyers are drilling down to every detail in the finan- cials and arriving at their own value. Cobb: There are a lot of older, broken deals in the market. It feels like last year's great purge has gained momentum this year. Lowes: The last 12 months seem to have seen more high-profile mergers, corporate restructurings and spin-offs. Although it appears a bit like musical chairs, it shows that the major players are becom- ing more focused on specific asset types and unwinding relationships with some large operators. This trend will bode well for the health of the acquisitions market in future years as these buyers return to the market with a renewed focus on growing their platform. This shift has also allowed smaller, regional buyers the opportunity to step into the acquisitions market. The SNF challenge SHB: The skilled nursing seg- ment is facing a number of regu- latory, reimbursement and opera- tional issues. How is that backdrop affecting acqui- sitions and dispositions? Lowes: The skilled nurs- ing industry is undergoing a sea change in 2018 due to several large-scale dis- ruptive forces impacting all players. The labor shortage is affecting the broader healthcare market, and skilled nursing most acutely. The wide- spread adoption of managed care (Medicare and Medicaid) contin- ues to place downward reimburse- ment pressure on skilled nursing revenues. We continue to see more and more skilled nursing facilities come to market as turnaround or value-add opportunities due to the inability of both independent and institutional operators to get ahead of these changes. The most active buyers in the space continue to be regional groups that can see the opportunity of these distressed facilities and have the financial backing to secure financing for turnaround deals. Cobb: The skilled nursing seg- ment continues to have a signifi- cant number of buyers. However, price expectations have been greatly reset. This has occurred primar- ily because the people buying nursing homes three or four years ago at the highest prices are finding themselves in financial and regulatory trouble. Jandris: It's true this segment is in a tough spot. What we're see- ing now after three to five years of a pretty frothy market is a divest- ment by REITs and other multi- state owners. Buyers today tend to be private, regional owner-operators. These companies have a better skill set for taking on the various challenges of these need-driven assets, includ- ing a new Medicare reimburse- ment system, the privatization of Medicaid to managed care, hospital discharge lengths of stay, general declines in private pay, and difficul- ties in managing and maintaining staff. Firestone: The buyers are nimble private equity and regional opera- tors. Larger operators (and related investors) have been net sellers. This can be largely explained by the operating risk and claims envi- ronment. This also signals that the optimal size of a firm in the space may be shifting smaller. SHB: Which segment(s) of seniors housing are you most bull- ish and bearish on and why? Carriero: I am most bullish on skilled nursing. It has been a seg- ment of the asset group that for years has not had a large invest- ment pool. I feel that is because of the government regulations. I am somewhat bearish on assisted liv- ing, mainly because of new con- struction within the asset class. I feel this has generated an increased interest in skilled nursing. Clousing: The rental campuses with multiple levels of care in strong secondary markets with lit- tle or older competition look to be the best performing assets with ini- tial lease-up this year. Additionally, some of the tro- phy assets in very urban markets should do very well as they are almost exclusively shielded from competition and close to a large labor pool. The higher rates also shield an owner from fluctuations in the labor costs given the higher Kris Lowes Evans Senior Investments Adam Heavenrich Senior Living Investment Brokerage arranged the sale of Townsend House, a 30-unit assisted living facility in Chico, approximately 90 miles north of Sacramento, for an undisclosed price.

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