Specialized Brokerage in the Senior Housing Industry

Anyone remotely interested in senior housing investments knows the complexities involved. Success in senior housing investments does not come easily. There can be many complications, pitfalls, challenges and even red tape involved in senior housing transactions. For veteran and inexperienced players alike, senior housing investments require precision, thorough research, attention to detail and proper timing.

Commercial real estate brokerages are the professionals who handle income producing investments. They typically specialize in a certain sector, whether that is retail shopping centers, office complexes, apartments or subsets of the senior housing industry. Each sector presents its own set of challenges, rules and method of operation.

As a result, it is imperative that those looking for investments in the senior housing industry to use the right investments specialists. By selecting a brokerage that specializes in senior housing this will minimize issues and maximizes your chance for success.

The Senior Housing Industry Has Its Own Challenges

While managing any real estate transaction has challenges, deals within the senior housing industry are substantially more complex. Because the senior housing industry incorporates real estate as well as a healthcare component, buyers must not only deal with the typical real estate details they also need to deal with regulating government agencies, there are several places where novice investors may run into issues that an experienced brokerage can help you navigate.

Those looking for senior housing investments in the senior housing industry must also consider the complexities and processes of:

• Regulated healthcare
• Reimbursement model
• Patient/Employee records
• Licensure
• Certification
• Debt acquisition
• Equity
• Documentation
• Compliance issues

Because of all these layers of processes and procedures, it is highly recommended by all investments specialists to utilize a senior housing brokerage. The right brokerage provides all the resources necessary to build and execute the perfect senior housing investment.

Investments Specialists in the Senior Housing Industry Take The Lead

There are various brokerages within the senior housing industry. Each has its own set of specialists, training and education, previous experience and transaction history.

Veteran investors consider the JCH Group the leading senior housing brokerage. Our team specializes in consummating deals within all sectors of the senior housing industry.

The JCH Group has an extended history and reach in the senior housing sector that cannot be matched. Our position as investment specialists within the senior housing industry allow us to effectively:

• Confidentially source buyers and sellers
• Place debt
• Fund equity
• Locate operators
• Manage compliance issues
• Access confident attorneys, CPAs and consultants

By utilizing the JCH Group as your senior housing brokerage, investors eliminate bothersome hindrances that can otherwise destroy a budding or time-sensitive transaction. In addition, senior housing investments are designed with expert care and attention, so no detail is overlooked. With the JCH team of investment specialists to lead investments in the senior housing industry, there are no mistakes.

The JCH Group Is Your Premier Senior Housing Brokerage

The JCH Group is the preferred senior housing brokerage for experienced and new players alike. When you start your journey in the senior housing industry, be sure to contact the JCH Group.

Your phone call is obligation free. We provide a free evaluation of your investments. The results equip you to make a sound decision and maximize return potential. Our complimentary senior housing valuation is our gift to you. Contact the JCH investment specialists at JCH today!

Senior Housing Industry Labor Shortage

The senior housing industry has attracted so much attention in the past few years. New capital has entered the market place. Developers have built and plan to build even more facilities over the next couple of years. With the demand for skilled nursing and assisted living facilities and other healthcare properties increasing day by day, it’s simple to see why the senior housing industry grows at the rate that it does.

However, not all aspects of the senior housing industry grow at the same rate. While there is an unprecedented amount of facilities opening; for operators opening these new facilities, there is little talent to staff these new buildings and deliver the quality of care necessary to meet industry standards (or requirements).

Work in the Senior Housing Industry Fails to Attract Talent

The fact of the matter is that currently immigrants occupy the majority of low-skilled labor in the senior housing industry. Some operators and industry veterans suspect this has to do with the differing attitude immigrants have toward senior citizens. While American workers tend to be ageist and find working in the senior housing industry at the facility level unattractive, those from foreign countries exhibit greater levels of respect and responsibility towards the senior community.

This makes for great labor simply because immigrant workers are often more compassionate and caring, delivering better quality care than their natural born American counterparts, at a lower requested wage.

Low-skilled Labor is Affordable in the Senior Housing Industry

In addition, employing immigrant Americans for the senior housing industry makes economic sense. Simply stated, immigrant workers are willing to do more for less compensation as opposed to conventional American workers.

By a simple calculation, operators and administrators easily see that employing immigrants as entry level labor in the senior housing industry is the most cost-effective solution. Because this type of labor requires little skilled knowledge, there is no need to overpay despite the heavy workload. For now, this is the model that works financially.

However, with so many facilities opening in the senior housing industry and even more people needed to work these facilities, labor—and specifically skilled labor— is becoming a pressing issue. For now, there may be enough low-skilled labor to fill the need, but there is already a shortage of administrators, advanced caregivers, managers and other upper division employees.

The Senior Housing Industry Needs Changes

Investments specialists within the senior housing industry agree that eventually at a minimum, larger companies will need to hire and train their own staff members. Education and training are becoming fundamental for employees on all levels in the senior housing industry.

Currently, with the rise of competition, operators work to cut down on operational costs. However, constantly cutting corners with low-skilled labor may cut down on quality of care, which residents will most certainly notice.

In order to keep businesses open and beds filled, the quality of care must deliver what’s expected from their residents. The senior housing industry can become just as attractive to talent as large hospitals and PCP offices. It is simply a matter of making some changes.

First, raising the entry level wage rate becomes necessary. Even though higher compensation and training will cost money and time these changes will hopefully yield better quality care and longevity of both residents and staff. With longer lasting results operators can rely on maximum profitability with a full roster of residents and a dependable staff.

Work with the JCH Group in the Senior Housing Industry

While the overbuilding of facilities will work itself out with time, the question of labor remains a concern. Altogether, the senior housing industry will identify the necessary changes and find a solution to the labor shortage. In the meantime, the JCH Group can help you navigate your next senior housing investments.

With real-time information, extensive experience and expert advice, the JCH Group helps you make your mark in the senior housing industry. Meet your investments specialist. Call the JCH Group today.

The State of the Skilled Nursing World

Census

In recent quarters, census seemed to be an issue for Skilled Nursing facilities; this factor hindered financing efforts for some investors and operators. The census issues seemed to be experienced on a national basis by SNF operators in Q3 and Q4 of 2017. On a positive note, many operators appear to be rebounding from this recent decline. Like many phenomena in business, these types of variances in census occur because of the cyclical nature in the Skilled Nursing sector. Therefore, it’s critical for operators to work with lenders and equity providers that know and understand skilled nursing operations. This knowledge base allows lenders to identify the cycle of census in skilled nursing and not punish the operators for these variances when they are shopping for debt and equity.

Tax Reform

So far, we have not seen any direct impact on the senior housing industry due to the recent tax reform congress passed. Once 1031 exchanges were left unchanged by law makers, everyone appeared to breathe a huge sigh of relief. We will have to see how these tax reforms play out in the second half of 2018. Presently, it appears that most business models can increase their labor force under the new tax reform adjustments. Hopefully, senior housing operators can do the same.

Lenders

The consensus is that lenders will continue to focus on the same indicators: regional & local market conditions, operator track records, facility financial performance, current state and federal reimbursements and forecasts, how RCS-1 plays out and the quality of the physical plants.

Types of Debt Available

Conventional long term commercial loans, and non-agency debt, are still somewhat illusive in the sector. We don’t see that changing anytime soon. The easiest, most abundant debt in the market place, are bridge loans and long-term HUD debt. These two types of loans should remain relatively easy to obtain, assuming the assets performance supports the contemplated loan amount. Accounts Receivable loans or asset-based loans (ABL) continue to be readily available to operators as well.

Advice Going Forward

The best advice we can give as brokers to operators is to stay focused on operations. It’s easy to get distracted by all the institutional debt and equity chasing in the senior housing space. Stay focused on your operations. Specifically, maintain quality managed care contracts and hospital relationships, keep census high, manage expenses and risk factors, and stay in compliance with licensing. If your operations are efficient and profitable, all the other components of the business will fall into place.

NIC Dallas Recap

The National Investment Center held its regional conference this year in Dallas, Texas from March 7 to 9, 2018. As usual, there was an excellent turnout. All segments of the senior housing industry were well represented including vendors, operators, brokers, managers, lenders, attorneys and others.

With so many like-minded investment specialists and players in attendance, it was easy to recognize the general consensus and outlook for the future of the senior housing industry.

Newcomers Enter the Senior Housing Industry

It became evident at the NIC conference that the senior housing industry remains attractive to new players, particularly investors and operators of other product types. While general attendance was robust, there was an unusually high number of new players or those with very little experience in the senior housing industry.

Investments in the senior housing industry are exceptionally attractive to investors simply because they yield returns that cannot typically be matched by other real estate asset classes. Because the backbone of the senior housing industry is healthcare, and therefore need-driven, the demand for these products will only increase.

The JCH team met several equity-lending partners prepared to enter the senior housing industry, and because of anticipated investment returns this is unlikely to change.

Expect New Product in the Senior Housing Industry

With the influx of inexperienced equity entering the senior housing industry, we can safely expect there to be a considerable number of new facilities opening in the coming years. However, because of these inexperienced operators and developers spearheading some of these projects, product design and efficiency may well be subpar.

These novice operators may experience several setbacks that cause them to miss pro-forma budgets. Causes may include poor design and location choices, insufficient funding, inappropriate partners or any variation thereof. As a result, while new senior housing investments open, many may well have to endure some turbulence, sometimes severe in nature.

However, overall, the senior housing industry remains bullish in demeanor. All sectors of the senior housing industry are busy with work. The components necessary for healthy senior housing investments—debt, equity and deal flow—are all in place.

The Senior Housing Industry Lacks Skilled Manpower

As with any business, operators still share the same worries. Within the senior housing industry, operators anticipate changes in interest rates and inflation. Most importantly, they worry about the lack of manpower or a skilled labor force in the senior housing industry.

With the number of new senior housing investments opening or set to open in the future, there simply is not enough talent to cover anticipated labor demand. It is already increasingly difficult for operators to find and recruit skilled people to work in the facilities. Unfortunately, talent and training are both limited.

This is a problem that many expect to grow worse before a solution emerges.

Make Your Senior Housing Investments with the JCH Specialists

The JCH Group is the preferred brokerage in the senior housing industry. Our investments specialists have unmatched experience leading, designing and closing senior housing investments in the senior housing industry.

No matter your experience level or standing, we have the tools and approach to make your next senior housing investment both intelligent and profitable. The JCH Group is your best resource in the senior housing industry.

Selling assisted living or skilled nursing facilities in the senior housing industry? Selling healthcare properties? No matter what, determining and settling on a sales price for your senior housing investments is incredibly important. This number not only determines whether or not the sale goes through, it determines whether or not the buyer and seller meet their numbers long term.

When determining a sales price, the basic criteria applies to every senior housing investment:

• Location
• Quality of the physical plant
• Market demand
• Profitability

Once all empirical data has been analyzed, the next step is to determine pricing strategy.

Naturally, sellers in the senior housing industry want the highest sales price possible from their senior housing investments. On the other end, buyers in the senior housing industry want to pay as little as possible for their senior housing investments.

With these conflicting agendas at play, how do we reach a fair and achievable sales price for a senior housing asset?

Strategy One: Go Above Market Valuations

This strategy values your senior housing asset above market in the senior housing industry. For example, if your senior housing asset has a current market valuation of $20MM, you list for $24MM.

This pricing strategy does two things. First, it fishes for a higher price. Second, it attracts only serious buyers who perceive its potential value.

While this strategy is attractive because of its large price tag, it also can spell trouble down the line. Buyers make promises they ultimately can’t keep. In addition, with an overvaluation, it becomes impossible for buyers to deliver with the current financing climate in the senior housing industry.

It is also likely that buyers attempt to restructure the deal before the sales process comes to an end. They often times will try to renegotiate terms and potentially lower pricing.

Strategy Two: Dip Below Market Valuations

The second pricing strategy used in the senior housing industry is to dip below market valuations. If your senior housing asset has an objective value of $20MM, you list for $19.5MM, or somewhere near there.

Be advised not to dip too low below market valuations. If the senior housing investment is significantly undervalued, buyers may think there is a hidden issue, which deters them from making forward movement.

Overall, this pricing strategy generates a great deal of interest because it seems like a valuable deal. Sellers using this strategy for their housing investments often get a high volume of inquiries and offers. As a result, a biding war is created. When about two or three bidders remain, the price of the asset rises from the bidding process.

The problem with underpricing senior housing investments is that once a bidding war begins, the bidders can drive the price well above the current market valuation. Then, once again, we deal with impossible expectations that cannot be met in the senior housing industry.

Strategy Three: Meet Market Valuations

The last pricing strategy is to list at the current market valuation common in the senior housing industry. If your senior housing asset is worth $20MM, list for $20MM and hold firm.

In the senior housing industry, this pricing strategy has worked best and yielded the most favorable results. Because both sellers and buyers deal with real numbers and expectations, both sides are able to deliver.  It allows for a smooth escrow period and sets realistic goals for the buyer. In short, it is the most balanced method.

While this pricing strategy does not provide the type of potential overbidding as the previous methods, it minimizes trouble down the line and protects your senior housing asset’s sales process.

Make Your Sale with The JCH Consulting Group
Investments Specialists

The senior housing industry offers extraordinary investments. Especially this year, in some markets there are a record number of new senior housing assets breaking ground and opening. The overall value of the senior housing industry is only rising, which is why your next senior housing investment should be an intelligent and calculated choice.

The JCH Group has served the senior housing industry for 20 years, brokering deals for both buyers and sellers alike. We provide complimentary pricing strategies and free business valuations, so you know exactly where you stand in the senior housing industry.

Make the most of your housing investments in the senior housing industry and speak to the JCH investments specialists today!

The American Senior Housing Association held its annual conference this year in Orlando, Florida. From January 31 to February 2, most of the major players in the senior housing industry attended the event.

This was the perfect opportunity for operators, lenders, private equity firms and vendors to connect and collaborate at the start of the year.

Because of the focus of ASHA, most of the operators in attendance were from assisted living, independent living and memory care facilities.

The JCH Group had the chance to meet with new and existing clients for extended periods of time, trading information and resources while mapping out the senior housing industry for 2018.

Expect Stable Pricing in the Senior Housing Industry

While those looking to sell assisted living facilities push for a high price point, overall, buyers and sellers agree with the pricing when it comes to closing the deal.

With stable numbers for buying assisted living and selling assisted living, players easily get the capital they need from banks and private equity investors.

This means that there is plenty of money to build and open new senior housing investments in the senior housing industry. However, with so many new facilities opening soon, a new problem arises….

A Major Shortage of Talent for the Senior Housing Industry

Most operators in the senior housing industry are worried, not so much about pricing corrections, but with the lack of facility level talent available. When these new buildings open doors, they must be staffed appropriately. This includes ground-level caregivers, executive directors, directors of marketing and nursing, compliance consultants, regional managers, and everyone in between.

Operators in the senior housing industry see this as a growing dilemma because facility level staffing is already spread thin in existing operations. With new product opening on a weekly basis, new senior housing investment properties cannot afford to be short-staffed. Mega-operators may watch the quality of their services decline as the labor pool shrinks in relation to the number of facilities in operation. Small and midsized operators will feel this too as it becomes increasingly difficult and competitive to staff their buildings.

Now, operators new and old wonder, where will new talent come from?

Many suspect that eventually, mega-operators in the senior housing industry will have to create their own training programs or schools to equip facility level employees with the right skill sets. While no one wants to incur expenses, the shortage of talent is becoming more and more of an issue that most believe will only continue to grow.

Make Your Next Senior Housing Investment with The JCH Specialists

The JCH Group is the choice brokerage in the senior housing industry. We are the expert’s operators rely on for intelligent senior housing investments. Let us help you navigate the difficult terrain of the senior housing industry.

We offer a variety of services, whether you choose to buy/sell assisted living facilities or buy/sell skilled nursing facilities. Our team manages investments portfolios of all types and sizes to increase your wealth and profitability.

The JCH Group investment specialists are available with real-time information and extensive experience to make intelligence decisions that deliver unmatched results. To make your next senior housing investment the right one, work with the JCH Group, the leading brokerage of the senior housing industry.

In the past several years, the senior housing industry has welcomed new investors from other real estate product types. The sector has grown over time into one of the favored real estate investment classes for investors. In addition, with the demand for new assisted living, skilled nursing and other healthcare properties growing, lenders are working with developers and operators to supply new product to the space.

Watch for These Two Metric Changes in the Senior Housing Industry

Everyone in the senior housing space can expect interest rates and potentially capitalization rates to change in 2018.

Interests rates on debt from banks will rise, making debt more expensive. As interest rates rise by increments, cap rates may also rise. As a result, valuations on senior housing investments may also adjust.

Major players in the senior housing industry are anticipating these changes, but when and how fast has yet to be seen. Specific numbers also depend on market conditions. For buyers in the senior housing industry, this means higher payments on debt, but they may pay less for the asset overall. For sellers, they may not receive the same net proceeds next year as they would this year, JCH believes that the timing is excellent in 2018 to sell.

Buy Skilled Nursing Facilities or Sell Skilled Nursing Facilities

Large REITS continue to dominate real estate ownership in the skilled nursing sector of the senior housing industry. However, REIT’s have started to strategically divest of skilled assets. With too many large healthcare operators in the mix, sometimes the talent pool has fallen short which can cause operational issues to arise. As a result, these large REIT’s are cleaning up their portfolios and are deciding to sell skilled nursing facilities that are underperforming. They may also choose to reorganize assets or break them into smaller groups.

Following suit, midsize operators are gaining ground in skilled nursing. These regional operators have hit the sweet spot with just the right number of properties to manage in order to maximize proceeds and operational efficiency.

Lastly, mom- n-pop operators are facing a complete fade-out as they close shop and divest their assets to larger operators. Because they have little contract negotiating power and the resources to compete with larger players, the single asset operators may soon be completely out of the skilled sector of the senior housing industry.

New Products Open for Independent and Assisted Living Facilities

In 2017, there was a significant amount, if not record-breaking amount, of new construction. So much in fact, that many seasoned operators are concerned with over saturation of product. Time will tell how quickly new beds absorb into the marketplace and how it affects rental pricing and valuations. This year, and in 2019, operators will finally get their answer.

The bulk of new product will be in the independent, assisted living and memory care sectors. As the doors to new sites open, operators and investors will finally get to see just how well the market absorbs these new units, how fast and at what rates.

Soon after beds are filled, submarkets will emerge. Most likely categorized by metro areas, some regional products are bound to outperform others. It will become clear where demand is high and where supply exceeds needs.

The Senior Housing Industry Still Has Space for More

As larger and more powerful companies dominate the senior housing industry, smaller operators and investors are pushed out. However, there remains room for smart senior housing investments.

The demand for senior housing will exist as long as the elderly need care and a place to live. Currently in the senior housing industry, the costs for these services can be high. Not just anyone can afford high private pay assisted living rates, even though they need the care.

That leads to investment opportunities in affordable senior housing. This remains an untapped market that is sure to boom once the product itself is available.

Overall, 2018 is set to be a productive year for the senior housing industry. Historically, pricing is high, and debt is cheap. With plenty of equity and debt in the senior housing industry, operators are positioned to have robust pipelines for new product. 2018 is on track to be a high transaction volume year.

Make the Most of 2018 with the JCH Group

The JCH Group has helped operators of all skill levels navigate the senior housing industry. Our investments specialists are your best resource for making smart decisions with and for your facilities.

Whether you decide to sell or purchase skilled nursing facilities and/or assisted living facilities, we will find you the right buyer, seller, asset and price.

With the landscape of senior housing changing, let us be your guides. Speak to one of our investments specialists today and find the right move for your senior housing investments. Contact Nick Stahler at 714-746-1663 or Jim Hazzard at 714-463-1677.

Investments in the skilled nursing market have endured great turbulence the last five years. With so many different asset classes in the senior housing industry and the reimbursement climate in constant flux, investment specialists and operators alike have waited for a definitive answer on how to navigate within the marketplace. Now, as the dust has settled a pattern has become clear.

Mom and Pop’s Struggle in the Skilled Nursing Industry

In the last several years, Mom-n-pop shops, or single asset operators, have endured significant struggles in the skilled nursing sector. The majority have left or are considering exiting the skilled industry altogether. The main reason why they have been met with failure is simply because they are too small to compete with larger operators. Simply stated, they cannot win the lucrative contracts needed to keep their doors open, nor can they weather changes in reimbursement or large lawsuits.

Skilled nursing facilities differ from other retirement properties in that they are a contracted reimbursement model. Those in need of specialized care turn to skilled nursing facilities for proper medical attention around the clock. Generally, these seniors do not find these homes by themselves. They receive recommendations and placements from their healthcare providers.

How do these healthcare providers know what skilled nursing facility to recommend or place their patients in? They typically have contracts with specific operators and facilities at set rates.

For example, Kaiser Permanente is a nationally recognized medical provider serving hundreds of thousands of people. A substantial portion of their clients are senior citizens needing placement in different asset types in the senior housing industry, some of which will inevitably be for a skilled nursing facility.

Behind the scenes, Kaiser will need to find skilled nursing facilities that meet their standard. They will need to draft and negotiate contracts detailing services, benefits and payments structures. However, with all this work, it is unlikely that Kaiser will negotiate several contracts with smaller SNF operators. For the same amount of work, they can deal with just one large SNF operator who can offer 2,000 beds instead of 90. As a result, small SNF operators do not get the contracts with larger medical providers, and therefore lose out on clientele.

Furthermore, in the senior housing industry one bad lawsuit can destroy small operators. Without financial resources that the larger operators have, mom and pops find it difficult to fight back or settle. The odds are simply stacked too high against these one-to-two asset operators in the skilled nursing industry.

Mega Operators Have Their Own Issues

On the other side of the senior housing industry, large operators boast their presence. With nationally recognizable names and big payrolls, these operators employ hundreds, if not thousands, of specialists, nurses and managers. Unfortunately, by collecting too many facilities to operate, talent is spread thin, sometimes resulting in subpar performance.

Many larger operators have reached a point where they can no longer operate with effectiveness or efficiency. Particularly because these portfolios are spread throughout the US.  Every region requires its own compliance regulations, marketing styles and contract negotiation. However, with limited talent it is impossible for these operators and managers to deliver. So, while these mega operators win the big contracts necessary to fill beds, they may lack the manpower and resources to maintain the service quality if they are too large.

Midsize Operators Win Big in the Senior Housing Industry

Somewhere in the middle, midsize operators have struck gold. These are operators with 30 to 70 assets. This gives them enough power to negotiate and obtain profitable contracts yet remain small enough to operate effectively. Generally, these midsize operators are regional in nature.

This sweet spot has allowed the skilled nursing sector to remain standing, and may be the model operators need to follow to maintain maximum efficiency.

Services provided in SNF’s are necessary to the senior community. People will always need specialized care and residence. Despite the turbulence in the skilled nursing sector, doors need to stay open because demand remains high. So, what can operators do now? By either downsizing or accumulating other facilities, current operators that do not identify as midsize can make the changes necessary to be successful in the senior housing industry.

Restore Your Senior Housing Investment with the JCH Group

The JCH Group is a premier brokerage for the senior housing industry. We provide an array of services for buyers and sellers of all types and sizes. If you’re looking for help navigating the SNF market, we are your top resource.

Our investments specialists determine the strengths and weaknesses of your portfolio, and provide a plan that makes your senior housing investment outperform the standard.

For answers to your questions, contact Nick Stahler at the JCH team, 714-463-1663.