Call us Toll Free: (800) 719-4262
Senior Housing > Blog > buy skilled nursing facility

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.

Rosy Future For Healthcare Industry Is Bringing Everyone Into The Act

Senior Housing investors who are eager to fill the gap between supply and demand, expect to acquire more healthcare real estate as they look forward to growth through acquisition and development. Senior Living industry leaders see that the demand for senior housing is expected to grow as the population of older Americans is projected to double by 2050. That growth is sparking increased activity in the entire Healthcare market for Assisted living, independent living, Continuing care communities, Skilled Nursing facilities, and transitional post acute care facilities. The market for senior housing mergers and acquisitions continues to shatter records and expectations, making 2014 a landmark year for the Healthcare industry.

REITs, public and private equity firms and foreign investors are all competing for acquisition opportunities. According to statistics, more than 50%of the acquisitions are being completed by local and regional providers, 40% by publicly traded and national chains, and the rest by private equity and not-for-profit.  In 2013 non-traded REITs raised 20 billion in capital carving out their roles as significant players in senior housing figures. Non-traded REIT’s have raised approximately 11 billion year to date.   In 2014 the BIG THREE REIT’s have already acquired several billion dollar portfolio deals. Reported at the recent Chicago Nic Conference, the three REITs have been responsible for 7 billion of transactions year to date. A California based private equity firm is moving forward with plans to develop 750 million worth of new construction over the next three years for which it is enlisting foreign investors to help fund a portion of the pipeline.

The growing demand for Senior Housing includes seniors of varied financial capability. There is the demand for high end Assisted Living for the affluent, but there is also a growing need for low-to moderate income senior housing for those seniors with less financial resources. The gap in care offers the investor the opportunity to provide more affordable options not only for the 3.5 million seniors currently living below the poverty level, but also for the middle class Americans who are aging. Developers who formally sought inexpensive building sites, now are biting the head of the snake and building in highly regulated zoning areas like California and New York.

The future looks bright for the Healthcare Industry in the 21st century as we see increased investor interest in all types of Senior Housing. It is no longer viewed as an investment just in a singular property type, but as an accepted asset class in a “complex delivery of care”.

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!