Seniors Housing Business is the magazine that helps you navigate the evolution of the seniors housing industry.
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62 www.seniorshousingbusiness.com Seniors Housing Business n February-March 2015 By Matt Valley Brian Beckwith was built for his role as CEO of Formation Capital LLC, a post-acute healthcare private equity and investment frm based in Alpharetta, Ga. In short, he hates to lose out on deals. "That's a common trait here," he says of the frm launched by Chairman Arnold Whitman and President and Co-Chairman Steve Fishman in 1999. "We're not good losers." The company has a track record of strong performance and a repu- tation for execution in the market, emphasizes Beckwith, who has served as the frm's CEO for the past four years. "We have a loyal investor base and we are attracting signifcant capital to invest along- side Formation." By being nimble and oppor- tunistic, Formation Capital has maintained a national investment presence with nearly $5 billion of managed investments in post-acute healthcare, including real estate comprising over 60,000 beds in 35 states. The private equity frm's acquisition pace has increased and its portfolio has become more diversifed over the past four years. About 15 percent of Formation Capital's real estate portfolio is private pay, a fgure that it seeks to boost. The frm's already large foot- print has grown to include a major investment in seniors housing across the pond. After losing out to Terra Firma more than two years ago in its quest to acquire Four Seasons Health Care, a care-home operator in the United Kingdom, the company scored a victory last fall. In November, Formation Capital and its acquisition part- ner, Safanad Ltd., entered into an agreement to purchase 261 nursing and residential care facilities in England and Scotland from NHP for approximately $761 million. The portfolio includes 12,500 beds and has an overall occupancy of approximately 88 percent. HC-One, a wholly owned subsid- iary, manages a majority of the properties. "They are senior care homes. In this case, they are mostly government-funded homes through the local authorities in the U.K.," says Beckwith. "It's something that we expect will be a growth area for us." On this side of the Atlantic Ocean, Formation Capital and its investors acquired 14 skilled nurs- ing facilities in the mid-Atlantic region for approximately $150 mil- lion last June. The portfolio was comprised of 1,658 beds operated by Consulate Health Care, another Formation investment and the sixth largest provider of skilled nursing care at the time. Prior to joining Formation Capi- tal, Beckwith led the lending and investing efforts for healthcare real estate and senior housing for GE Capital, where he also oversaw $7 billion in loans and investments. Seniors Housing Business recently sat down with Beckwith to gain a better understanding of Formation Capital's overall investment strat- egy and discuss some of the trend lines in the industry in America and the U.K. Seniors Housing Business: Forma- tion Capital is a dynamic frm with several moving parts. How do you describe yourself to the outside world? Brian Beckwith: We're a private equity frm focused on post-acute investments. Our investment strategy most recently has been comprised of 50 percent services and 50 percent real estate. That includes our traditional real estate investments, where we are buying healthcare real estate and leasing it to a third-party operator. That's our history. We really look like a REIT in that world. The other part of what we do is invest in services in the post-acute space. That includes leading care provid- ers such as Consulate Health Care, Trident USA Health Services and Hospice Compassus Inc. SHB: What is Formation Capital's defnition of "post-acute" invest- ing as it relates to seniors housing? Beckwith: It is a very simple defnition: anything that happens after the hospital stay. We are try- ing to make investments across the sector — whether it's a synthetic post-acute network that we create through different types of invest- ments, or whether we are opportu- nistic in a specifc real estate deal. That includes everything from independent living to hospice. Some of the services that are provided to a post-acute patient are provided in a real estate-based setting: independent living, assisted living, Alzheimer's and skilled nursing. Some are more service-based: home health, hospice and rehab services. We are becom- ing more involved in every one of those areas to take advantage of the expertise and relationships we have developed over the years. When we talk about post-acute investing, our history had been real estate, which is where our skills developed and that was our true core competency We've broad- ened that scope more recently, and we expect to continue to invest in the real estate sector as well as select service sectors. SHB: Is there a sweet spot for For- mation Capital when it comes to making an investment in a post- acute facility (either by dollar amount or type of transaction)? Beckwith: Our sweet spot is opportunistic-style investments — fnding areas where we can add value and add that value quickly. We look for transactions where we think we can provide an advan- tage and align ourselves with strong management teams and operators. A few examples of our value- add approach include investing capital to expand or update the physical plant of our facilities, or buying from one owner/operator and transitioning to a new opera- tor to manage the facilities, even though that is never an easy task. We try to place ourselves in a posi- tion where with a little more of the nitty-gritty work — and without the pressure of being a publicly traded company — we're able to transition a portfolio to be a stable Brian Beckwith n The SHB Interview By investing in both seniors housing and related healthcare services, the private equity frm is making its mark. Formation Capital's post-acute play