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HUD LOAN CHANGES EASES AR FINANCING FOR SNF PROVIDERS

Recent changes in the language in the AR Agreements reduce confusion, clarify ambiguous statements, and speeds up the process which benefits the SNF provider in acquiring AR financing.  The earlier version of the agreement left many deals on hold because of the lack of clarity which discouraged many AR Lenders from making a commitment.  The good news is that the new language in the agreement gives providers a much better chance of obtaining AR financing.  The changes are open for public comment.  However, HUD is allowing deals to close before the end of the comment period if both parties agree to and accept the terms of the new wording.

HUD 232 CHANGES:

DEFINITION OF AR LOAN OBLIGATION   Excluded many restrictions. The new definition takes a Broad approach which requires AR Loan obligations to be directly related to the benefit of the facility.

CLARIFICATION OF EVENTS THAT TRIGGER A “CUT-OFF” By eliminating many of the reasons that would cause HUD to subordinate its interest in the AR of the provider,   the new agreement states that only defaults to the AR loan can cause the AR Lender to cease funding and trigger a cut-off time.

CLARIFICATION OF HUD AND FHA LENDER’S NOTICE AND CONSENT RIGHTS New agreement addresses specific scenarios that have caused problems in the old agreement. The new agreement makes it clear that AR advances that are over the agreed upon maximum commitment amount, but over the borrowing base formula, only require notice and not consent from the FHA Lender or HUD.

MODIFICATIONS WITHOUT CONSENT   The new agreement clarifies what modifications can be made to the AR loan documents without HUD’s consent or the consent of the FHA Lender.

These changes are significant and will make it easier for Skilled Nursing providers as well as the full spectrum of Senior Living providers to secure AR financing, a blessing for the Senior Housing Industry in this economy where demand is greater than the supply.

Decisions Decisions! A Healthcare Providers Dilemma “Keep Up With The Jones” or Sell

Shifts in Health care, the aging population and consumers’ expectations are key elements in forcing providers to evolve and keep up with the fast pace advancement in all areas of the Healthcare industry. Today, senior living is about wellness and engagement which provides programs that fit resident’s emotional, physical intellectual or vocational needs. So the provider is faced with keeping up or falling by the wayside. Keeping up, however, offers many options for a thoughtful healthcare provider to consider.

BIGGER IS BETTER: Operators of Assisted Living, Independent Living, Skilled Nursing, and CCRC who own one or two facilities are drastically and aggressively increasing their portfolios. Portfolio growth will not only help if one facility has a bad year, but it will also help to reduce cost. Mergers and acquisitions are the key growth strategy for the senior housing and care industry by using economies of scale.   High merger and acquisition activity is also being driven by new investors switching from other real estate markets to the senior housing. Some transitions and affiliations have been necessity-driven due to financial and operational challenges. However, recent activity has clearly been strategic in nature. Large and small providers are on the move. For example, the recent merger between Omega Healthcare Investors and AVIV REIT created a 10 Billion real estate trust (REIT)

SENIORS COME IN ALL SIZES AND SHAPES. At one end of the scale are the high end senior living communities offering bistros, Wi-Fi, well equipped fitness and wellness gyms, and all the luxuries that the affluent boomers demand as a necessity. But what about the seniors that can’t afford these expensive services and amenities? The Gap in care will ultimately push the senior housing industry to provide more affordable options. So another opportunity and choice is given to the healthcare provider to address the need of low to moderate income services for the middle class. Not “keeping up with the Jone’s” and merging with other providers to improve quality of care and lower costs may be the answer to keeping a provider from exiting the industry.

SO HANG IN THERE The future looks bright. As Senior and Housing mergers and acquisition reach phenomenal heights the average price paid per unit is hitting new highs as well. The average price per unit for assisted living has increased 30.5 % from $150,600 to $196,600, for independent living from $164,000 to $211,300 per unit, for skilled nursing from 73,300 to 78,400 per bed. Driving the increase in skilled nursing prices was the growing number of over $100,000 per bed skilled nursing facility acquisitions in the past two years, which has gone from just five in 2012 to 12 in 2013 and 11 so far in the first three quarters of 2014 data shows. The availability of equity and cheap debt, plus an influx of new buyers, has been driving prices up and cap rates down in a seniors housing bull market that is seeing more mergers and acquisitions than ever before.

OPTIONS AND CHIOICES are numerous for the Healthcare provider. We are all living longer and leading a healthier life style and as demand for healthcare communities far exceeds the supply, it behooves the healthcare provider to take a long look at the future before making definitive decisions to stay in the industry or to sell.

Tech-Savvy Seniors Demand Assisted Living Communities Keep Up With The Times

Demand driven providers are finding that no longer does a computer lab satisfy the requirement of tech-savvy residents.  Technology progresses so rapidly that many in their 70s, 80s and 90s in their own homes are accustomed to the latest technology.  They expect the same environment when they choose an Independent Living, Assisted Living or CCRC.  The affluent and technologically experienced Baby boomer generation is expected to be even more demanding.

Computer labs and business centers in senior housing communities are less important to senior living prospects today than they were two years ago according to Ziller Senior Marketing agency.  The growing number of seniors using mobile devices and going online antiquates the “computer room”.  Today’s senior goes on line every day, checks their email, uses an e-reader and an IPad.  Accustomed to having access to the world in their own home, they naturally seek the same environment in an Independent, Assisted Living or any type of Healthcare Facility.

THE NEW REALTY, WIFI IS A MUST

Senior communities that have upgraded their facilities to accommodate greater internet access by offering Wi-Fi have attracted the tech-savvy resident.  For example Texas-based Morningside Ministries offering Wi-Fi found that it was vastly important to resident satisfaction.  Morningside began to install Wi-Fi to all of its campuses and continues to add Wi-Fi to its buildings undergoing redevelopment and its cottage properties.  Residents use technology to check bank accounts, investments, retirement accounts, order products, print maps to travel, access books for their e-readers, or to access social media like Facebook.  Almost all use the technology to stay in touch with family members by e-mail.   Keeping up with the times, Emeritus, whose $2.8 billion merger with Brookdale Senior Living forms the largest senior living provider in the nation, has transformed common areas into Internet cafes.

THE NEW REALTY CREATES THE NEED FOR TECH-PARTNERS AND TECH SUPPORT

Implementing and improving technology in existing senior communities and in new development to   KEEP WITH THE TIMES it becomes necessary to have a tech partner and engage a staff tech support person. Only 40% of senior housing organizations have somebody who is head of technology.   Engaging with tech partners in the early stages of a development can refine the plan and design in the construction process to get the most out of the technological services.   Creating a position for a tech support staff member will ultimately help senior housing communities maximize their use of technology and their ability to provide technology services to all residents.

ONWARD AND UPWARD FOR A BETTER SENIOR WORLD THAT KEEPS UP WITH THE TIME!

Memory Care Demand Exceeds Supply & Shapes Future of Healthcare Industry

SENIOR LIVING PROVIDERS anticipate increased return on investment as a result of a favorable demographic environment. It’s just basic Business Cycle 101”.   With the growing baby boomer population there will not be enough senior housing for the demand of retired boomers.  Memory care communities are specifically in demand.

It is reported that every 68 seconds, an American develops Alzheimer’s disease.  By 2050 Americans will develop Alzheimer’s every 33 seconds.  The disease, which has no cure, no prevention and no proven way to slow its progression affects 5 million Americans today. It is expected to nearly triple by 2050 as baby boomers age. The nation’s 65+demographic, which currently accounts for 13% of the overall population, is expected to more than double by 2050 to more than 89 million  (20% of the population) according to the U.S. Census Bureau.

To support the need for memory care facilities, many assisted living communities are adding memory care to their services, and developers and architects are including specific design to accommodate the growing demand.  Memory care is very different from Assisted Living care and requires a unique structural design to support optimal living conditions for those who suffer from dementia. It also can effect financing and loan terms. However difficult, the need must be met and the return on investment encourages Healthcare investors to venture into the market.

Brookdale, one of the nation’s largest senior-living operators, has 647 communities in 36 states.  12% of the company’s residents (5771 seniors) are enrolled in Brookdales’s Clare Bridge memory care program at 86 facilities.  Smaller assisted living facilities are also devoting the much needed care and space to Alzheimer residents.  Maristone Living with two locations in the Nashville area, reports that Alzheimer is a growth unit for the company.  About 25% of rooms at Maristone are devoted to memory care residents.

As memory care providers compete to meet the needs of this growing segment of Americans with dementia many are turning to innovative solutions that revolve around engaging the senses.  The emergence of Snoezelen Therapy on the memory care scene is growing.  The therapy requires a controlled multisensory environment which allows memory care residents to guide their own therapy.  The purpose of a sensory room is to excite the five senses and re-engage residents with their environment.  Silverado Senior Living, a memory care provider in 8 states has shown the therapy to be successful.  Vice President of Silverado reports that incorporating the senses is the best means to communicate with memory-care residents.

So once again we see progress being made and the HEALTHCARE INDUSTRY IS ALIVE AND WELL.  The demand driven providers adjust to the demand and make giant steps in quantity and quality of service.