Senior Housing Conglomerate

The senior housing industry has been under great scrutiny for the past few years. With new facilities opening each day and more construction underway, it seems everyone wants to play in the Senior Housing space.

As the titan of the senior housing industry, Brookdale is the largest senior healthcare provider in the country. With over 1,100 communities under their banner, they serve seniors with memory care, independent living and assisted living facilities. Unfortunately, with such size comes a greater challenge. Currently, Brookdale is under the microscope, and as the largest player in the senior housing industry, what happens to them may affect us all.

Trouble at Brookdale

It is common for senior housing operators to buy or sell facilities, merge and develop new product. For Brookdale, they have been able to successfully and repeatedly do so, becoming the behemoth they are now. However, it appears that the seams are beginning to come apart. With 1,100 communities, hundreds of operators, thousands of staff members and even more residents, Brookdale’s responsibilities continue to multiply as they grow.

With each new addition of senior housing investments, Brookdale also acquires different operating styles, management styles, regional market variations and resident expectations. As a result, schools of thoughts clash.

Differences in corporate culture affect management and, by consequence, resident service. In addition, these accumulated senior housing investments come from different sectors and markets. As a result, operational approaches that work for one facility may not work for another. This means that Brookdale’s top management cannot impose the same method of operation for all their communities. Brookdale’s executive suite struggles to find a unifying method to leading 1,100 communities.

Brookdale Looks for Outside Help

At present, Brookdale is searching for outside help. Upper management is searching for the right candidates for new ownership/investment to maximize shareholder returns.

Senior housing industry veterans Ventas and Blackstone were the two companies with the horsepower and equity to strike a deal with Brookdale. Unfortunately, neither worked out. Now, Brookdale is looking toward an international bid.

The Beijing-based investing conglomerate, Zhonghong Zhuoye Group, is seeking ownership of Brookdale.

There are plenty of critics of this solution. With the current domestic issues plaguing Brookdale, inviting a foreign influence seems far from the right answer. Many oppose this option and fear what would happen if an international organization held control over the largest senior healthcare provider in the United States. Consequently, senior housing industry operators and those preparing for their next senior housing investments wait for its conclusion.

Navigate the Senior Housing Industry with the JCH Group

The growing layers of complexities continue to complicate the Brookdale situation. As the largest senior health care provider, what happens with Brookdale inevitably affects the rest of the senior housing industry.

The JCH Group plans to keep the senior housing community informed as things develop with the potential Brookdale transaction, reporting on how it may bring changes to our senior housing industry and what steps to take next to keep your senior housing investment stable.

JCH National Real Estate Investor Magazine Article

Nick Stahler, Senior Vice President, JCH Consulting Group

The State of the California and National Senior Housing Market: Analysis and in-depth look into its future.

Senior Housing has been a stable asset class so far in 2017, but several factors could affect market performance in 2018 and 2019. The industry is divided into three major market segments: Independent Living (IL), Skilled Nursing Facilities (SNF), and Assisted Living Facilities (ALF). For the scope of this article our focus will be on licensed healthcare facilities, SNF and ALF. ALF deals have been relatively calm in 2017, with only a handful of large transactions this year and only one large operator divesting on a national basis. Conversely, Skilled Nursing Facilities (SNF) have seen some changes, the trends of Real Estate Investment Trusts (REITS) divesting of SNF assets continues, as large portfolios have entered the market from large industry operators and REITs.

One major transaction that was recently announced is the $7.4 billion merger of two REITs: SABRA and Capital Providers (CCP), a spinoff of Ventas. In 2016, Ventas took all SNF assets out of their portfolio and created Care Capital Providers. A well-managed SABRA will then emerge as the dominant REIT, assuming SABRA’s corporate culture, with its CEO running the entire new entity. The merger of the two REITs is a good fit, and allows them to compete against larger REITs.

After pushing upwards in 2016, Cap Rates have remained stable in 2017 for both SNF and ALF. The class “A” ALF Cap Rate will be in the high 6% range, and then go up, depending on the facility’s quality, performance, and location. SNF Cap Rates have remained consistent between 12% and 13%. However, large portfolio sales may skew these numbers somewhat once they close. Two of the industry’s largest SNF operators are currently marketing assets, with one of them announcing that they have a large portfolio of SNF assets available in California.

New construction continues to be popular in ALF and Memory Care Facilities, so much so that depending upon which expert you speak to, between six and seven markets in the country have become oversaturated with new construction. This potentially creates a situation where we will have to wait for demand to catch up to new construction starts in those markets. Fortunately, most industry veterans feel there is enough demand in the pipeline that it all will be absorbed at some point. However, the question is how fast, and will we see any major issues arising from that? Equity partners may become concerned about debt, which is usually predicated on a tight model for a stabilized asset (a facility that is full, stabilized, and operating). If demand does not keep up with construction, there could be some turbulence in the market, and equity investors possibly looking to sell if they are dissatisfied with returns. But keep in mind that there is a large population of seniors and aging baby boomers who will soon need senior housing services.

Senior Housing operations have been stable in 2017. SNF operators face larger issues due to Medicare reimbursement increasing only 1% over the next year, and President Trump’s budget for 2018 calls for $610 million in Medicaid cuts over the next decade. Expenses continue to rise for both ALF and SNF. The minimum wage has increased as have insurance costs – two of the industry’s highest expense line items. Fortunately, ALF’s with a private pay model have been able to pass on these increases to residents.

It is more difficult for a SNF to recapture these increases in expenses due to the reimbursement-based model with government set rates. Again, ALF appears promising, but there might be some new construction issues down the road with oversupply and lack of demand in certain markets. The SNF operational side could see some turbulence with increased expenses and flat revenues, but there is still plenty of profitability in the market for well-run facilities. Looking forward, expect ALF Cap Rates to remain steady. On the low side, Class A assets will be in the high 6% range. Most of the assisted living deals will trade in the 7% range, and Cap Rates could go up to 8% or 9%, depending on the asset’s quality. For a secondary or tertiary market, the Cap Rate most likely will be 8% or 9%. This is unlikely to occur in 2017, but rather in 2018 or 2019. If construction starts are open and operating but not filling, we could see some turbulence in Cap Rates and their effect on ALF pricing. SNF Cap Rates rose in 2016 and have maintained in 2017. Also, where these large portfolios will close remains to be seen. Obviously, it will be a driving force in the market and set pricing. When that many facilities and beds are trading hands, it will set a precedent for future pricing. We’ll have to wait and see. Today the overall attitude of investors and industry people is one of calculation and caution in Skilled Nursing. While it is unlikely that current valuations are going to break any records, some favorable pricing going forward is not only attainable but sustainable. Overall, the outlook is stable and therefor positive.

It is expected that interest rates on the debt piece will continue to rise, although how much and how fast has yet to be seen. Many operators and investors that we deal with have made contingency plans for an increase in interest rates on debt. If rates go up significantly, pricing will be affected. Still, at this point it looks stable, and everyone has prudently planned ahead.

The big topics looking forward will be the absorption rate on new construction, specifically on ALF and Memory Care, as well as how some of these large portfolios play out, and what Cap Rates and Price Per Bed they close at in the Skilled Nursing world. That will dictate what pricing looks like for the remainder of 2017 as well as 2018. Nevertheless, all other fundamentals in Senior Housing are still very strong, and the number of seniors and baby boomers who need Senior Housing services will continue to grow at a substantial rate.

For the past twenty years the senior housing industry has experienced immense change and growth. The JCH Group has brokered hundreds of transactions and witnessed present changes influencing the future. Senior Housing investments don’t necessarily look like what they used to, and the senior housing industry has matured in unprecedented ways.

The Senior Housing Industry Withstands Shakeups

The senior housing industry has long withstood shakeups and challenges. For example, the skilled nursing sector experienced significant bankruptcies due to PPS, the perspective payment system. In 1997, skilled nursing operators had major issues with cash flow because of PPS and many had to shut down their operations altogether.

Then, with the Great Recession the senior housing industry was blanketed with an onslaught of external economic issues. Operators struggled to obtain debt for acquisitions and refinancing.

Fortunately, the senior housing industry came out of these down turns in style. In fact, it was one of the only product types that raised rental rates in 2010. Much of that is because the services the senior housing industry provides are need driven.

Read: The Effects Of New Investors On Senior Housing Pricing

Seventy Percent of the Senior Housing Industry is Fragmented

As of 2015, REITS owned 30 percent of real estate in the senior housing industry. This leaves 70 percent of facility ownership for small regional, or mom-and-pop operators. Investments specialists believe that it is within this 70 percent that the evolution of the senior housing industry will continue.

The National Investment Center tracks and records all movement in the senior housing industry. At present, all signs point to the senior housing industry becoming an institutional grade asset class. This makes it the perfect opportunity for serious investments.

Expect the Senior Housing Industry to Further Evolve

The senior housing industry is a need-driven business. No matter what funds look like for any family, specialized care from skilled nursing, assisted living or memory care facilities are necessary. This fundamentally acts as a pillar for the senior housing industry no matter the overall climate of the economy.

Currently, the demand pipeline for senior housing continues to grow. People with capital from other products types are moving into the senior housing industry to make their play on senior housing investments.

While overall, the senior housing industry remains robust some regional markets are over saturated with new product. Across the nation there are six to seven markets with potentially too many construction starts and not enough demand. Investments specialists will wait to see just how long it will take for demand to catch up with supply. However, new buildings are always good for the senior housing industry, adding value and competition for better services for residents nationwide.

Your Housing Investment with the JCH Experts

The JCH Consulting Group is the top brokerage for your senior housing investments in the senior housing industry. With over 110 years of combined experience, our specialists are unmatched in acuity and experience, and we have the track record to prove it.

Make the most of your senior housing investment. Call the experts in the senior housing industry by contacting the JCH Group.

The senior housing industry is quickly becoming a mecca for real estate investment. Many new players have entered the arena from other asset classes, but the senior housing industry is far from crowded. It may, however, be difficult to spot the right opportunity, particularly one that matches your goals and talents.

Still, for those searching to buy assisted living facilities or post their CCRCs for sale, possibilities are endless. For operators, leasing facilities in the senior housing industry is becoming increasingly commonplace, and may be exactly what’s needed to build a portfolio in its infancy.

Responsibilities of the Tenants and Landlords

Why lease a skilled nursing facility? Why lease an assisted living facility or other healthcare properties for that matter? REITs own the real estate in as much as 40 percent of facilities in the senior housing industry. As a result, leasing is not only common but, for many, the practical choice.

Many operators turn a healthy profit from leasing facilities in the senior housing industry. In fact, it may also reduce responsibilities and risk for the tenant as liability is distributed between two parties instead of one.

Read: Red Flags To Look For When Investing In Assisted Living

The majority of leases are triple net (NNN). This means that the tenant is responsible for all expenses, including property taxes, repairs to the plant and any and all insurances. Meanwhile, the landlord services the debt or mortgage.

On occasion, there are leases with provisions for large repairs if they exceed a predetermined dollar amount, landlords share the cost. This is often to cover unusual incidents, such as a car crashing into the building or fire.

Senior Housing Industry Leasing Negotiations

There are some clauses in the contract negotiations that look different from others in accordance to market conditions. Unfortunately, market conditions change. For that reason, it is ill advised to negotiate your own lease contracts.

Negotiations on market rate leases should be left to brokers, attorney’s and investments specialists who know the senior housing industry inside and out. They are familiar with the parameters of the industry and the market conditions, they create boundaries to the clauses that protect you against unfair and unrealistic expectations.

These lease contracts include clauses such as lease rates, escalators and performance covenants.

Escalators and performance covenants are meant to ensure that tenants do well enough to add value to the facility. The senior housing brokerage chosen as a representative should be well versed with where these lease terms should stand. Doing so will only help you satisfy these requirements year after year.

The JCH Group for Your Housing Investments

No matter who you are in the senior housing industry, the JCH specialists are your top resource to make your senior housing investments flourish. From skilled nursing facilities to assisted living facilities to other types of healthcare properties, we are prepared to make the most of any situation. Our agents skillfully handle negotiations, contracts, lease terms, valuations, consultations, sales and transactions.

To learn more about how the JCH Group improves your senior housing investments, contact our investments specialists at your convenience.

Senior Housing Brokers

With the senior housing industry attracting as much attention as it is, everyone is looking to get connected. Senior housing brokerages work as an integral link between buyers and sellers to other vital resources within the senior housing industry.

There have been several new senior housing brokerages entering the industry; many of them claiming to be experts who can help procure transactions. While this may be true with a transaction that can be worth millions of dollars, it is just as important to choose the right senior housing brokerage for the best guidance through the process.

The Top Investment Specialists Have Real Experience

A few years of real estate experience are just not enough to be an expert in today’s market. The senior housing industry today requires more knowledge and finesse than ever before. Senior housing investment experts need to know the terrain of the industry and how it’s changing and what that means for your specific deal.

Read: Senior Housing Sales Process

At the JCH Group, our investment specialists have actual, in depth operational experience and have worked in the senior housing industry at the facility level. Core team members Nick Stahler, has been an administrator for assisted living facilities in California and Jim Hazzard served as a regional director of marketing for the Southwest Division for what is now known as Kindred Care. As a result of this hands-on experience, our team can tell you exactly what happens within your senior housing investments and how to make positive improvements.

The Top Investment Specialists Have a Complete Plan

As the senior housing industry continues to develop and change, so must the successful broker. To make the most of your senior housing investments, whether as a buyer or seller, you need investment specialists who offer more than one detailed plan. This provides you the flexibility to stay within the boundaries of your preferences while stepping into the competitive senior housing industry.

The JCH Group has multiple resources available to make your senior housing investments a complete success.

Our investments experts have:

• Private lists of qualified and pre-approved buyers and sellers
• Both targeted and mass marketing campaign tactics
• An extended network of trusted vendors, attorneys and other service providers
• Complimentary facility valuations or in depth broker opinion of values (BOV)
• Twenty plus years of experience as senior housing brokers
• Operational experience in assisted living and skilled nursing facilities
• A solid track record for senior housing investment success

The JCH Group investment specialists combine their entire know-how to create the best deal for you, whether you are selling or buying senior healthcare properties.

Read: The Best Time To Sell Your Senior Housing

The JCH Group is the Right Senior Housing Brokerage

For the past 20 years, the JCH Group has proudly served the senior housing community with unwavering dedication. We work to assemble the best team of industry experts for your senior housing investment to be successful.

It is our knowledge and first-hand experience that sets us apart from other senior housing brokerages. Our team has successfully transacted all types of deals in the senior housing industry including CCRCs, skilled nursing facilities, assisted living facilities and other healthcare properties.

Your senior housing investment is potentially worth tens of millions of dollars. Before moving forward, discover what the JCH experts can do for you. Contact one of our investments specialists for more information. Nick Stahler, [email protected], 714-463-1663 or Jim Hazzard, [email protected] 714-463-1677.

The key to building the right senior housing investment is matching the right buyer to the right seller. Both sellers and buyers have different requirements and expectations from the transaction process. This is where JCH thrives and adds value in finding that perfect match.

To make the match, JCH senior housing investment specialists use several marketing methods to connect these two parties. While these two popular methods each have their unique strengths and weaknesses, they work well for different reasons.

The Targeted Marketing Campaign

The targeted marketing campaign exposes the opportunity only to a select few qualified buyers. In this process the senior housing investment is offered to well-qualified buyers, sometimes already pre-approved by the seller.

The targeted marketing campaign limits exposure, which specifically reduces confidentiality breaches, an important factor in the success of a sale.

Read: When is a good time to sell your Senior Housing?

When confidentiality is breached, news of the potential sale circulates throughout the senior housing industry. Rumors spread and, almost always, reach the facility listed for sale. Thus, staff members might resign, caretakers leave and residents relocate to different facilities. Breaches in confidentiality have the potential to be detrimental to the sales process of senior housing investments. A targeted marketing campaign limits irresponsible exposure and protects the asset from confidentiality breaches.

The targeted marketing campaign also allows time for buyers to research and analyze the senior housing investment. Allowing them to put forth offers they can perform on. Realistic offers cut down on re-negotiations, moving the transactions along at the agreed upon pace.

The Mass Marketing Campaign

At the other end of the marketing spectrum is the mass marketing campaign. This notifies the entire senior housing industry of a listing. Specialists use a variety of media to announce the sale, including Internet marketing, phone calls and e-mails. With just a touch of a button, a listing can be sent to 5,000 potential buyers in the senior housing industry at one time. With mass marketing campaigns, it is worth noting that confidentiality has a very good chance of being breached.

Mass marketing campaigns generate a great deal of exposure for the asset. It can also produce a bidding war. While the seller may interpret the attention and activity as positive signs, this is not necessarily true.

In order to secure their potential senior housing investment, bidding wars force buyers into submitting bids they cannot perform on. This is done only to cut out the competition. Once that is done, the buyer attempts to renegotiate with the seller during the due diligence period.

However, mass marketing campaigns in the senior housing industry still work. In fact, many sellers choose this method to cast a wider net in hopes of quickly obtaining full market value for their senior housing facility.

The JCH Solution for Your Perfect Housing Investment

The senior housing investments specialists at the JCH group have topped success after success using both marketing strategies. We use the strength of the senior housing industry for your fullest advantage. Whether it’s a mass marketing campaign, targeted campaign or something in between, JCH works with each seller to customize the right campaign to achieve their goals.

Our team expertly handles niche-oriented sales as well as those for the entire senior housing industry, and anything in between. Choose the top senior housing brokerage for your next senior housing investment. Contact Nick Stahler, [email protected]  or Jim Hazzard [email protected] at the JCH Group for more information.

The National Investment Center Conference was held in San Diego at the Hilton Bay Front Resort this year. From March 22 to 24, approximately 1600 players from the senior housing industry gathered to participate in this conference.

For years, the NIC has served as the premier meeting place for serious brokers, lenders, attorneys and operators in the senior housing industry. During the conference, attendees were able to meet with other players from all over the country to discuss, setting up deals, transaction specifics, possible partnerships and more.

Successful Operators Shared Proactive Energy

For operators and those looking to build or acquire their next investment in the senior housing industry, the NIC Conference is an invaluable resource and opportunity.

Over the course of two days, the JCH Group held over 35 meetings. Unlike the past, clients initiated 90 percent of those meetings. This led to unusually productive sessions as clients came with specific and relevant deals and topics to discuss.

With plenty of opportunities to network and a mutual eagerness from participants, the NIC Conference produced a successful event for the senior housing industry. There were several breakout sessions, keynote speakers, cocktail parties and meetings that would be unavailable elsewhere. Operators and investments specialists alike shared vital information on how the senior housing industry is changing and what to do about it. Overall, those attending shared a positive outlook, mirroring the findings of the ASHA Conference earlier this year.

The Senior Housing Industry Holds Strong

Operators agreed: the buyer pool has diversified.

Because REIT’s are retracting from the large acquisitions, the playing field has opened tremendously. Players from within and players from other product types can find and build opportunities for senior housing investments with ease.

However, there exists a soft spot in the marketplace. Low inventory makes it challenging for buyers to find the right senior housing investment. With the influx of new players, there can be a disconnect in valuations and how they are derived. Sellers always want the best price and usually take the highest bid. However, the highest bid isn’t always the most probable to close.

With new players entering the marketplace, veterans anticipate mistakes with the learning curve for beginners. With seasoned operators sticking to tested fundamentals, experts expect the senior housing industry to continue to hold strong.

The JCH Group as the Active Senior Housing Brokerage

How well each facility does affects the overall senior housing industry. For this reason, the JCH Group works to match the right seller to the right buyer for a senior housing investment that will succeed.

The investments specialists at the JCH Group are experts in building productive and solid transactions. No matter your goal with your senior housing investments, we have the tools and resources to deliver.

For the most accurate and reliable senior housing investments or to learn what your facility is worth, select the specialists at JCH. We are the right brokerage in the senior housing industry.

There is enthusiastic capital in the senior housing industry. Day by day, the market attracts new players, builds new deals, swaps facilities and grows. In fact, the senior housing industry has now evolved into an institutional grade asset class allowing private equity firms to turn their attention to the senior housing market in a big way. In addition, real estate investors from other product types are planning and executing their entrance into the senior housing industry

With a new supply of players and money, conditions are bound to change. At the JCH Group, we see firsthand just how these new investors are changing the game.

A Case Study of a Distressed Asset

The JCH Group recently handled a lucrative transaction of a distressed assisted living facility located in Southern California. The seller listed this property at a very healthy price that many would consider overvalued.

The JCH Group continued to build and design the transaction, pushing forward with marketing. In only a few weeks, we received multiple offers.

Three of these offers came from well-established veteran operators. They were individuals who worked in the senior housing industry for more than 10 years with several senior housing investments in their portfolio. Their bids were, as expected, lower than the asking price. However, all three bids were within $500,000 of each other.

Read: Negotiations Throughout The Sales Process

This revealed that veteran investors are disciplined in their bids, fair and know the value of certain senior housing investments. For the most part, they set the parameters for the senior housing industry by keeping valuation metrics consistent.

The other two offers came from first-time buyers. These individuals had experience in real estate but not within the senior housing industry. However, they did have plenty of capital to support their bids, which were 40 percent higher than the previous group of bidders. Consequently, their bids were very close to the seller’s asking price.

The transaction proceeded with the seller accepting the highest bid, after the two first time buyers got into a bidding war.

New Players May Cost Veterans

Naturally, the seller will almost always accept the highest bid. This is becoming a problem for veteran players because new investors share the habit of overpaying for senior housing investments. In the end, this drives market prices higher. If seasoned operators want certain deals, they may need to pay more than the property is worth in their eyes.

Read: 2017 Senior Housing Forecast

The senior housing industry has always been vulnerable to outside influence. In this case, new capital may push valuations higher than necessary, even if there is no experience or education to support those moves.

The Top Brokerage in the Senior Housing Industry

As of now, senior housing industry veterans outnumber newcomers. In addition, overvalued senior housing investments are becoming the norm, only time can reveal when the tide will shift.

Experienced operators trust the JCH Group with their senior housing investments. From business valuations to marketing and deal closing, our specialists are your top resource.

For more key insight within the senior housing industry, contact one of our team members. We are more than happy to help you design the best senior housing investment possible.

The past several years have been historic for the senior housing industry. We have seen and continue to see very high construction volume. Today a record number of people are seeking opportunities in senior housing investments. With the senior housing industry growing rapidly some potential issues are beginning to show themselves.

Operators often worry about how these new facilities will fare against the competition and what it would mean for market valuations. How long will they take to fill? Will they ever fill and stabilize?

Before those answers reveal themselves, the first question is, who will staff these facilities?

Read: Management Contracts In Senior Housing

The Labor Pool for the Senior Housing Industry is Running Dry

Memory care facilities and assisted living facilities are appearing at every corner. While new buildings add value to the senior housing industry, operators and investors have repeatedly expressed concern over how to staff these new buildings and fill them with residents.

The riskiest stage for any new senior housing investment is when the doors to the facility first open. The empty beds must be filled. As a typical goal, about 25 to 30 percent of the beds are pre-sold before opening. From there the fill up phase of the facility begins. Quality staff members such as caregivers, nurses and administrators are crucial, particularly during the fill-up phase of a new facility. Once those doors open, it is the staff that attracts and retains residents.

It takes high quality labor for a facility to be successful.  That being said, good, quality labor is becoming hard to find in the senior housing industry. It is difficult to fully staff  a 100+ unit facility right the first time. However, to see a return on senior housing investments, it is wise to recruit talented staff members from the start.

Read: 2017 Senior Housing Forecast

Protect Your Housing Investment and Attract Talent

The senior housing industry as a whole is short on quality labor. While some operators tote one star player, that will not be enough. A healthy senior living facility requires a team. To remedy this shortage, growth of the labor pool will have to happen organically.

Hiring out of staffing agencies has worked in the past, but there simply are not enough high quality caregivers.  Operators will need a new method or provide a strong incentive to recruit new talent. This may mean that the senior housing industry will take new recruits and train them in house.

Despite the setback of acquiring good labor, the senior housing industry still has many opportunities. Operators who prepare and plan properly, will have healthy growth in their housing investments.

Choose the JCH Group for Your Housing Investments

The investments specialists at the JCH Group have overcome every obstacle that the market has presented. With extensive experience in building strong deals and portfolios, our team of experts can help you navigate your way through the potential labor shortage.

Protect and grow your senior housing investments with the JCH Group. We are available for consultations and free business valuations. Trust in our team to secure your spot in the senior housing industry.