Seniors Housing Business is the magazine that helps you navigate the evolution of the seniors housing industry.
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64 www.seniorshousingbusiness.com Seniors Housing Business n February-March 2015 Don't be left out... Join the conversation and keep up to date with industry insights, trends and new developments. Subscribe to Senior Housing Forum. Join over 12,000 professionals who receive daily valuable senior living resources. www.seniorhousingforum.net A Place for Conversation & Collaboration big employer. Closing hospitals is a hard thing to do. Sometimes they're oversupplied in certain markets. SHB: How much debt does For- mation Capital typically put on the properties it acquires? Beckwith: That's part of the beneft of being private, and that's part of the way that we compete with some of the big guys. We're able to use a decent amount of leverage and our relationships with lenders have been help- ful. They've been supportive. We're using 70 to 75 percent loan-to-value on our real estate transactions. SHB: And you're comfortable with that LTV? Beckwith: I'm probably more comfortable with it than the lend- ers are, but yes. Historically that number had been 85 percent. Prior to 2007 and especially when I was at GE, 85 percent was pretty standard. SHB: Formation Capital is oppor- tunistic and nimble. Where do you see the company in two to three years? Beckwith: In two to three years it's inevitable that we will become a little bit more institutional. We're attracting more institutional capital, often with SEC reporting requirements, and we have the infrastructure to transition the frm to become a little bit more institu- tional. The goal is to maintain that opportunistic, creative, kind of aggressive entrepreneurial spirit that has made Formation success- ful, while attracting the capital and providing the right level of infor- mation for an institutional investor. I'm hopeful that we can manage that balance well. SHB: What level of return can investors who invest their money alongside Formation Capital expect to receive today? Beckwith: I can tell you that returns have compressed as prices have started to become aggressive. I'm hesitant to throw out specifc numbers because it provides our competitors with a little insight into how we do this. However, I will say that historically we were looking at cap rates for skilled nursing of 12 to 12.5 percent. Today, they are defnitely lower by at least 100 basis points. Assisted living has dropped and could be in the 6s, sometimes even lower. SHB: What's the relationship between Formation Capital and Formation Development Group (FDG)? Beckwith: It is a sister company. I interact with the team daily, and the development company can give us very good feedback on specifc markets. When we are evaluating possible assisted living investments, FDG has proven very helpful. If we have a concern about an operator or market, the frst thing I do is talk to Mark Spiegel (president of FDG). In turn, when we see opportunities that may make sense for FDG, we point them out and get the team involved. It's part of our strategy — creating pockets of expertise that allow us to make better decisions. So, it's a very complementary, close relationship. SHB: What do you like most about your job? Beckwith: I enjoy this role mostly because it enables me to apply my fnancial skill set to an industry that at the end of the day can help communities, residents and patients. I'm here to deliver returns for investors. But the ancil- lary beneft is that if we do our job well, we're enhancing the delivery of healthcare to a population that needs it. n