Senior Living News Wire

Being a senior housing manager is the core of what Sunrise Senior Living (NYSE:SRZ) does, but the company is also opportunistic in terms of buying real estate in advantageous situations, said its CEO Mark Ordan during the company’s first quarter earnings call. 

“We understand the capital markets, we understand the real estate market, so if there is an opportunity for us to buy real estate in an advantageous way we will do it,” he said. “Similarly, if we think that there is value in our real estate that would be better off with us not owning it and somebody else owning it, that’s fine as well.”

Sunrise used to own a portion of the Ventas (NYSE:VTR) portfolio, Ordan pointed out, but sold it back to the REIT a couple years ago. Since then, his company’s metrics have “only improved.” 

“So, we don’t think that we need to own real estate to maximize the performance of those assets,” he said. “We will do it whether we are manager or we are an owner. We want to make sure that whatever we are doing, we are maximizing value and if that’s buying real estate we will buy it; and if it’s selling real estate, we will sell it.”

On ancillary services:

Sunrise is working toward enabling each of its 320 communities, many of which are owned by the operating company, to have the right to purchase and operate the community at “maximum efficiency” while providing the best care, Ordan said. He also mentioned the company’s efforts to pilot “terrific new programs” for memory care, to maintain its spot as the nation’s largest provider of memory care services. 

“The next obvious step is to say, ‘Well, what other services can we provide to our residents?’” Ordan said during the earnings call, adding that’s something they’ve been working on. “We want to make sure that when we do that, we do it properly and carefully, so that we don’t have a hiccup. So that is something that we foresee adding to what we do.”

As far as ancillary services go, Ordan said he thinks there are “great opportunities” for new service lines, but added that his company wants to keep a strong focus on its core offerings. However, “we still see significant additional opportunity running our business the way we do, just doing it better.”

Read the full earnings call transcript.

Written by Alyssa Gerace

With most older adults preferring to remain in their homes, according to studies by both AARP and MetLife Mature Market Institute, many senior living providers are seeing a need to expand their market by providing services outside of traditional settings. That’s not to say, however, that traditional senior living services aren’t still relevant.

The number of Americans aged 85 and older will more than triple to 19 million by 2050, while the 65+ crowd will more than double to over 88 million, projects U.S. Census data.

And according to the Center for Housing Policy’s 2012 Aging Report, the nation remains unprepared for the upcoming demand for supportive housing and services.

As of 2007, the number of Medicare-enrolled 85+ people living in supportive services communities or facilities was at 15% (compared to just 6% of the 65+ population). And while the percentage of the target market entering communities may remain small, the translated volume will be significant.

“The sheer number of individuals who will be in this 75+ category 10 and 20 years from now requires expansion of services and service options,” says Ken Curnes, Senior Vice President, Planning and Strategy, at advertising and marketing firm GlynnDevins. 

The question becomes, however, ‘In what way?’ he says.

While organizations who are already expanding their services are “well-positioned” to meet consumers’ needs, “even if the percentages stay the same with perhaps only 6% of older adults choosing a community setting, this represents many more individuals because there will be many, many more older adults in this country,” says Curnes.

At any rate, figures citing an overwhelming desire among seniors to remain in their homes aren’t new, points out Justine Vogel, the president and CEO of The RiverWoods Company, a continuing care retirement community located in Exeter, New Hampshire.

Only a small percentage of age- and income-qualified people would prefer to move to a senior living community rather than stay in their home, Vogel concedes. But those who do move often find themselves “happier, healthier, and more engaged than folks who stay in their homes,” Vogel says. 

“The community feeling that people have in their 30s and 40s when they are raising kids and living among people who are going through all of the same issues can be reborn in their 70s and 80s,” she says. “Generally this doesn’t happen in a [regular] housing development—people die, move away, or become more isolated—but it definitely happens in a continuing care retirement community.”

While it can be more cost-effective and preferable for some to receive care in their homes, it’s important to not overlook the population of healthy seniors in their 70s and 80s who welcome the opportunity to “really live—maybe with a service or two, maybe just with conveniences and a promise of care in the future to limit their risk,” Vogel continues. 

In that sense, CCRCs can function like a preventive model that helps people stay healthy and engaged, while essentially having long-term care insurance in the event of future healthcare needs.

“I think this will always appeal to a portion of the population and, if as an industry we could do a better job of convincing people that a CCRC is not a “choice of last resort” but rather a “funky new chapter in their lives,” we would have a happier, healthier, more engaged senior population,” says Vogel.

Written by Alyssa Gerace 

Love Funding Secures $8.56 Million Construction Loan for Fla. ALF

Love Funding recently closed an $8.56 million loan for the construction and permanent financing of Viera Manor Assisted Living Facility, a new senior living center in Viera, Fla., meant to provide housing for U.S. veterans.

Laura Saull-Smith, a senior director at Love Funding out of its Washington office, secured the loan using HUD’s Section 232 loan insurance program.

Berkadia Arranges $26 Million Financing for Texas Senior Housing Portfolio

Berkadia Commercial Mortgage LLC recently arranged $26.1 million in financing for Capital Senior Living’s four-property portfolio of senior housing communities, located across Texas.

Lisa Lautner, a senior vice president with Berkadia, worked with Fannie Mae to obtain 10-year, fixed-rate financing for Capital Senior Living’s property acquisition. 

The portfolio consists of communities offering independent, assisted, and Alzheimer’s services; they are located in Arlington, College Station, Conroe, and Stephenville, Texas. All four properties were renovated between 2010 and 2011, and have an average occupancy rate of 92%.

Berkadia completed the loan 60 days after the origination, meeting the borrower’s timeframe. 

“We are pleased to once again assist Capital Senior Living with its financing needs as it continues to acquire quality assets and expand its regional presence,” said Lautner. “They are a premier operator in our industry and we are proud to be one of their financial partners.”

Cain Brothers Completes $14.2 Million Bond Refinance for Elder Care Alliance

Long-time Cain Brothers’ client, Elder Care Alliance of Camarillo. Ca., recently closed a $14.2 million loan to refinance its outstanding Series 2000 variable rate demand bonds. Cain Brothers structured the new loan as a conventional taxable loan insured through FHA’s Section 232/223(f) program, used to refinance debt of licensed levels of senior care facilities, including assisted living, memory care, and skilled nursing. 

Elder Care Alliance of Camarillo operates 60 assisted living apartments and 18 memory care units that were built using tax-exempt, variable rate bonds, supported by a bank letter of credit with further support for a third-party guarantor. Even with this guarantor, says Cain Brothers, the operator had to periodically revisit the bank letter of credit’s renewal, and the situation became “even more severe” in the past two years thanks to the global debt crisis.

The refinancing loan allows Elder Care Alliance of Camarillo’s debt structure to lock in at a fixed, all-time low rate of 3.00% for 35 years.

Cambridge Realty Capital Arranges $11.3 Million of Financing for Chicago SNF

Cambridge Realty Capital Companies recently closed on a $11.3 million HUD Lean loan to refinance Columbus Park Nursing and Rehabilitation Center, a 216-bed skilled nursing home located in Chicago, Ill.

The fully-amortized, 30-year term loan was arranged for the property’s owner, an Illinois limited liability company, said Cambridge Chairman Jeffrey Davis. The loan was underwritten by Cambridge Realty Capital Ltd. of Illinois; its interest rate was not disclosed. 

KeyBank Provides $15.7 Million to Refinance REIT Acquisition Portfolio

KeyBank Real Estate Capital recently closed on a $15.7 million, 10-year fixed-rate Freddie Mac loan to Care Investment Trust, a healthcare real estate investment trust based in New York, to repay an interim bridge loan used to acquired three Virginia assisted living communities.

The transaction allowed Care Investment Trust to refinance the loan and lock in an attractive interest rate for a 10-year term for the following communities, all of which are operated by Greenfield Senior Living through a triple-net lease:

• Greenfield of Berryville, a 48-unit assisted living community located in Berryville, Va.
• Greenfield of Fredericksburg, a 26-unit assisted living community located in Fredericksburg, Va.
• Greenfield of Stafford, a 44-unit assisted living community located in Stafford, Va.

Beech Street Capital Closes $4.3 Million Refinance for Ill. SNF

Beech Street Capital, LLC recently provided a $4.3 million loan to refinance an Illinois skilled nursing facility using HUD’s Section 232/223(f) program.

Joshua Rosen, executive vice president of Beech Street Capital, worked on the transaction out of the firm’s Chicago office.

“This deal highlighted the tremendous strength of our underwriting team – our submission package held up wonderfully to HUD’s review during processing, and it was only a matter of days before our loan received approval,” said Rosen.  “The new debt service payments will have an immediate positive effect on the facility’s bottom line, something that is especially important here in Illinois, where the state is currently several months behind in its payments.” 

Evanston Nursing & Rehabilitation Center is a 57-bed facility located in Evanston, Ill.

Medicare-funded skilled nursing facilities are poised to absorb nearly $800 million in cut funding in fiscal year 2014 through mandated reductions under the Budget Control Act, according to a new Avalere Health Analysis funded by nursing home trade group The Alliance for Quality Nursing Home Care.

The top ten states most affected by sequestration-related budget cuts are projected to lose more than $455 million, combined, while nationally the cuts are expected to total $782.3 million, unless Congress is able to agree on deficit reduction resolutions. 

California tops the list of states impacted by sequestration in the Budget Control Act for Medicare payments to skilled nursing facilities in FY 2014, at nearly $76 million, followed by Florida, Texas, and New York—all states with higher-than-average senior populations. 

Source: Avalere Health, 2012

“Vulnerable nursing home patients, a fragile front line care workforce and economically-stressed facilities across America have been battered by a cascade of Medicare and Medicaid funding cuts over the past several years, and the sequestration threat looms large over a health sector caring for rising numbers of higher acuity patients,” said Alan Rosenbloom, President of the Alliance, in a statement.

Speaking on the nation’s rapidly growing senior demographic and the evolving nature of the patient population, Rosenbloom said the nation needs a more “rational, cost-effective Medicare post-acute payment system,” not what he terms as “irrational” Medicare cuts that “jeopardize ongoing access to quality care.” 

“There are better, smarter ways to finance seniors’ nursing home care, and a thorough discussion about how to do so is a paramount health policy priority,” he said.

Between FY 2012 and FY 2021, SNFs are expected to absorb at least $3 billion in new cuts thanks to “bad debt” provisions contained in the Middle Class Tax Relief and Job Creation Act of 2012, and overall, the industry is already slated to absorb $48 billion in funding cuts in that same window. 

CMS plans for payment updates to SNF PPS

The Centers for Medicare & Medicaid Services (CMS) expects to publish a payment update notice for the skilled nursing facility prospective payment system for FY 2013 by July 31, 2012, according to LeadingAge.

That means… There won’t be any changes in the rates or MDS procedures that require rule-making; there will just be an announcement of the new rates to begin October 1, 2012.

LeadingAge believes rates will increase on average about 1.6% – 1.8% over last year. Actual payment changes for individual facilities between the current year, which began October 1, 2011 and next year, which begins on October 1, 2012, will vary by geographic area and case mix. In its March 2012 Report to Congress, MedPAC cited then-current projections that skilled nursing facility reimbursement would increase by 1.8% in fiscal 2013, based on an estimated market basket increase of 2.7%, from which an estimated 0.9% productivity factor would be subtracted. The Medicare Trustees, on the other hand, use a 1.1% estimated productivity factor adjustment in their analyses.

However, if the 2% sequestration goes into effect, as detailed by the Avalere study, the payment rate increase will be “wiped out,” says LeadingAge. 

Written by Alyssa Gerace

Lifecare Properties, LLC, a real estate development and operating company, recently announced it has acquired property in Arlington, Tex. on which it plans to build a 67-unit assisted living facility.

The 5.2 acre site is located at 7708 S. Cooper Street and was bought from Anwar A Lalani and Sultana A. Lalani, trustees of Lalani Living Trust, for $610,000. The sellers had owned the property since June of 2009.

The new community will be known as The Residences at Sage Court; according to development plans, it will be a single-story building with two separate wings, one for assisted living and one for memory care. Three Architecture, based in Dallas, Tex., is designing the project. 

The 44-unit assisted living wing will have six different floor plans, while the 23-unit memory care wing will have two different floor plan options. 

Lifecare has contracted with T&G Constructors for the development’s design and construction, and the project is currently in the final design phase. It has already received zoning approval from the City of Arlington. 

Lifecare expects The Residences at Sage Court will be completed in the late summer of 2013, at which point it will be managed under contract by Paradigm Senior Living, headquartered in Portland, Ore. 

Written by Alyssa Gerace

Construction—Planned

Healthcare Realty Brokerage Represents Sale of Missouri CON for $17 Million Senior Care Development

Healthcare Realty Brokerage, a commercial real estate brokerage and advisory services firm specializing in senior housing, long-term care, and medical office properties, recently represented senior care developer Medical Holdings, Inc., based in Arkansas, in the sale of its affiliate entity, which held as its only asset a 240-bed certificate of need (CON), for $600,000.

The CON was originally acquired in two phasing in 2007 and 2010, and authorizes the construction of a new skilled nursing facility located in St. Charles County, Mo. The purchaser, Dardenne Creek Partners II, plans to use the CON to build and operate a state-of-the-art retirement community on 11 acres of land it already owns on Wing Haven Country Club in O’Fallon, Mo. The community is expected to include skilled nursing, short-term rehab, assisted living, and/or dementia care.

The project is expected to cost about $17.1 million, which includes the cost of the CON, the completion of construction in two phases, and the market value of the existing piece of land.

Selling the SNF development project required approval from the Missouri Health Facilities Review Committee of a third extension of the CON, and a site relocation three miles from the original site designated by the seller in the approved CON application, to Dardenne’s site in O’Fallon. Healthcare Realty Brokerage both arranged the sale and helped coordinate an extensive due diligence investigation enabling both parties to present their proposals to the CON committee for approval. 

Pathway Senior Living Looking to Develop Milwaukee Site for Assisted Living

Sunrise Senior Living (NYSE:SRZ) recently sold a site to Wangard Partners Inc. for $1.5 million, with the intention of selling the site to Chicago-area company Pathway Senior Living, who is planning a senior housing development.

Pathway wants to develop assisted living apartments on the 3.2 acre site, located on the south side of E. Capital Drive in Milwaukee, Wisc. The number of units is expected to range between 80 and 100, in two four-story buildings. 

Sunrise originally bought the site for $2.35 million in 2008 with plans to demolish existing vacant apartment buildings and build an 83-united assisted living facility. Because of the economic recession and resulting difficulty to obtain construction financing, the senior living provider dropped the project and eventually sold the land to Wangard Partners, who plans to sell to Pathway.

Pathway is presenting its development plans to the Community Development Authority. 

Ma. South Cove Manor Nursing and Rehabilitation Center to Build $30 Million Asian Nursing Home

South Cove Manor Nursing and Rehabilitation Center Inc. has received permission from the Quincy Planning Board to build a 56,000- to 57,000-square-foot nursing home catering to elderly Asians in the Boston area, reports Boston.com.

The company hopes to start construction on the approximately 141-bed, $30 million project by the end of 2012. The facility won’t be affiliated with Quincy’s South Cove Community Health facilities, which currently has a location in Boston’s Chinatown.

Although the facility will welcome anyone, it will cater to an Asian population with mostly-Chinese meals and activities geared toward Asian culture, according to the Boston.com article.

Miller-Valentine Group to Build $11.5 Million Senior Housing Project in Ohio

The Ohio-based Miller-Valentine Group plans to build affordable senior housing on the site of an old Delaware, Ohio hotel, reports The Columbus Dispatch. The $11.5 million project will feature a multi-story, 63-unit building along with seven single-story duplexes. The development will serve low- to middle-income seniors in the area.

The project is getting about $1.1 million in tax credits through the federal Housing Tax Credit Program, without which developer Denise Blake, with MV Residential Development, says the project couldn’t have gone forward.

Goodwill to Convert Scranton High School into $22.6 Million Senior Housing Project

Thanks to the promise of $1.49 million in tax credits awarded by the Pennsylvania Housing Finance Agency, Goodwill Industries of Northeast Pennsylvania will be able to convert a former high school into senior housing in a $22.6 million project, reports The Times-Tribune.

The award will help fund the redevelopment of the North Scranton Junior High School into 58 apartments and a redone auditorium that will be able to host community events. Goodwill will use the tax credits along with other funding that includes $4 million in state Redevelopment Assistance Capital Program money.

Construction—Underway

Bloomfield Senior Living Adding Memory Care Addition to S.C. Community

Bloomfield Senior Living is adding a 25-unit Alzheimer’s and dementia care addition to memory care community Belfair Gardens, located in Bluffton, South Carolina. The community reached capacity just three months after opening in December 2010; the new addition will be licensed for another 45 residents, making Belfair Gardens South Carolina’s largest Alzheimer’s and dementia care program. 

“We have more individuals on our wait list than residents,” said Bradley Dubin, a principal of Bloomfield Senior Living. The project has already broken ground, with expectations that construction will be complete by Thanksgiving this year. Both private and shared suites will be available.

Belfair Gardens’ memory care program features a low staff-to-resident ratio, sensory-based programming, personalized attention, and resident-centered healthcare that was innovatively developed by memory care specialists. It can accommodate residents in the early, middle, and late stages of the disease. 

Life Care Building $17 Million Nursing Home in Tennessee

Life Care Centers of America, based in Cleveland, Tenn., is building an 89-bed nursing home with an attached 30-unit assisted living center in Dayton, Tenn., reports TimesFreePress.com.

The project, which will cost an estimated $16.8 million, will replace an existing nearby nursing facility. The development is located on 16.45 acres of land, and construction is expected to be completed later this year. Amenities will include a large rehabilitation gym with state-of-the-art equipment.

Dillard Construction Co. is the builder for the project. 

Construction—Completed

$32 Million Affordable Senior Housing Community Opens in Riverside, Ca.

Affordable housing project investor WNC, in partnership with USA Properties Fund, recently celebrated the grand opening of Vintage at Snowberry Apartment Homes, a 224-unit affordable senior housing community in Riverside County, Ca. 

WNC provided $9 million in Low Income Housing Tax Credits financing for the project, which was developed by USA Properties Fund.

“There remains a dearth of affordable housing options for Riverside County’s large community of senior citizens,” said Will Cooper, Jr., chief executive officer of WNC. “This project was developed and leased up in an unprecedented 16 months and represents an important milestone in filling this substantial void.”

The $32 million development is located on 10 acres of land close to shopping, dining and public transportation options, and features one- and two-bedroom apartment homes that come in five floor plans. The community, located at 8402 Colorado Avenue in Riverside, also features fully-furnished kitchens with energy efficient appliances, and onsite amenities including a clubhouse, fitness area, pool and spa area, business center, laundry facilities, and covered parking.

Vintage at Snowberry’s design is described as “Spanish colonial-style” and offers residents a “mix of luxury, affordability, and independence,” according to USA Properties Fund’s president, Geoffrey Brown.

Financing partners for the project included WNC, The City of Riverside, Riverside County Department of Mental Health, Wells Fargo Bank, and Citi Community Capital. 

Senior care technology, including monitoring systems such as motion and activity sensors, are a “godsend” to some older adults (and their families) who want to remain in a senior living community’s independent living section for as long as possible, reports Minneapolis’ Star Tribune. 

At Kingsway Senior Living complex, located in Belle Plaine, Minn., nine sensors track one particular resident’s activity, dispatching data to the system’s developer, Healthsense of Mendota Heights, and allowing family members to remain aware of his status. 

For two years, it has helped keep him in his lower-cost apartment at the Kingsway Senior Living complex and out of the adjacent assisted-living unit. That $900 annual service saves him $22,000 a year.

Across Minnesota, thousands of elders are able to stay healthier, and delay or avoid institutional care, under the 24-hour-a-day attention of pressure sensors, motion detectors, pill dispensers, personal-alert pendants and other devices.

At Kingsway, each of the 22 assisted-living units has the full array of sensors included in its monthly fee.

They pay the full cost: one-time fees of $1,500 to rent and $550 to install and program the system, and a monthly monitoring fee of $150.

“That sounds expensive, but it’s about the same as two weeks in a nursing home,” said Sharon Blume, director of family services and technology at Kingsway. “The savings start pretty quick.”

Some senior housing providers are eligible for grants to implement aged care technologies for low-income residents, according to the Star Tribune; Kingsway just got a $250,000 state grant—for the second time—to expand its community, and is seeking federal money for subsidized senior housing.

The Healthsense Wi-Fi system can check residents’ blood pressure, blood sugar, and other vital signs, or track residents moving through the building, with the ability to send cellphone alerts to staff if it detects possible issues, or emails to family for routine updates, says the article. 

Read the full article at the Star Tribune.

Written by Alyssa Gerace

Here’s a list of possible turnaround opportunities for senior care facilities, ranging from troubled facilities that have lost Medicare/Medicaid licensing, to ones that have been shut down by the state, to places that plan to close their doors voluntarily for various reasons.

1. From Bangor Daily News (Maine)—Fight Brews Over DHHS Plan to Close Nursing Home

Name: Penobscot Nursing Home and Northern Bay Residential Center

Classification: Nursing home (Medicare.gov Nursing Home Compare listing)

Location: 12 N. Penobscot Rd., Penobscot, Maine

Number of Beds: 60 (certified for both Medicare and Medicaid)

Operator: Eagle Landing Residential Care LLC; facility is being managed under emergency receivership by Sandy River Group.

Situation: The Maine Department of Health and Human Services took over the nursing home’s management back in 2008 after allegations the facility’s finances were being mismanaged. The DHHS wants to close the home once a new facility is built nearby in Bucksport by a separate company. The nursing home’s owner and the property’s mortgage holder plan to fight the DHHS over the plan, arguing the closure could harm residents of the home, as well as the community. 

Residents: All still in the facility. Most are from the local area/community.

2. From the Times Union (New York)—Troubling Issues at Guilderland Nursing Home

Name: Guilderland Center Nursing Home Inc

Classification: Nursing home (New York Department of Health listing)

Location: 227 Main Street, Guilderland Center, New York

Number of Beds: 127 (certified for both Medicare and Medicaid

Situation: Financial issues mixed with deficiencies. Previous owners filed for Chapter 11 bankruptcy in 2008; current owner, Guilderland Realty Holdings corp., have a deal with the city of Albany to repay $1 million in unpaid property taxes. The nursing home has 52 citations for deficiencies (compared to the average of 24 in New York). 

Residents: As of March, facility was 96.9% occupied. So far, no plans to transition residents out. 

3. From the Chicago Tribune (Illinois)—State Moves to Revoke Joliet Nursing Home’s License After Resident Deaths

Name: Hillcrest Nursing and Rehabilitation Center

Classification: Nursing home (Illinois Department of Public Health listing)

Location: 777 Draper Avenue, Joliet, Illinois

Number of Skilled Beds: 84 (certified for both Medicare and Medicaid)

Situation: The Illinois Department of Public Health is revoking the nursing home’s license after two “suspicious” deaths occurred within six months of each other. 

Residents: At the time of the article, no moves had been made to transition residents out of the facility. 

4. From The Mercury (Pennsylvania)—Hundreds Oppose Sale of County-Owned Nursing Home

Name: Pocopson Home

Classification: Nursing Home (Pennsylvania Department of Health listing)

Location: 1695 Lenape Road, West Chester, Pennsylvania

Number of Beds: 275 (certified for both Medicare and Medicaid)

Situation: The county-owned nursing home is losing money each year; the county has to pay substantial amounts to subsidize costs of care not covered by Medicaid and Medicare reimbursements. In 2010, that figure was $2.5 million; in 2012, it will be an estimated $1.45 million. The aging facility also needs about $6 million in capital for upgrades. 

Residents: The residents are all in the building, and the nursing home is well-known for providing a high quality of care for its residents, according to the article. People are fighting for the facility to remain open. 

From Bangor Daily News (Maine)— Petitions to Keep Calais Nursing Home Open Headed to Governor 

Name: Atlantic Rehabilitation and Nursing Center

Classification: Nursing home (Medicare.gov Nursing Home Compare listing)

Location: 32 Palmer Street, Calais, Maine

Number of Beds: 52

Situation: The facility is Calais’ only licensed nursing home, and residents and locals want it to stay open. The facility’s owner is in talks to have the county take over the facility, with plans to build a new one 90 miles away. Atlantic Rehabilitation’s expenses are currently exceeding its revenues, and did so by $272,000 in 2011. After an April 5 hearing on the case, the state Department of Health and Human Services Commissioner has until June 6 to decide on whether or not the facility will retain its certificate of need, and whether or not the owner’s application to build a new facility will be approved. 

Residents: Resident census is dwindling due to fear of closure, according to the owner.

5. From NorthJersey.com (New Jersey)—Uncertain Future, Possible Sale, for County-Run Nursing Home

Name: Bergen County Health Care Center

Classification: Long Term Care facility (N.J. Department of Health and Senior Services listing)

Location: 25 B Piermont Road, Rockleigh, New Jersey

Number of Beds: 110 (Medicaid and Medicare certified)

Situation: The facility’s Medicaid and Medicare reimbursements are shrinking, forcing the county to subsidize operations and costing taxpayers $4.5 million in 2011. Many other county-owned and operated nursing homes, both local and nationally, have been privatized in recent years, the article notes, and this particular facility’s administration is in the “early stages” of considering options.

Residents: Still in the facility. 

Commercial real estate brokerage Healthcare Realty Brokerage, headquartered in Clayton, Mo., recently represented a Midwest regional operator to lease the company’s Kentucky skilled nursing facility to Advocat Inc., a publicly traded skilled nursing provider based in Brentwood, Tenn.

The lease for Arbor Place of Clinton has an initial 10-year term with two five-year renewal options, and contains an option to purchase the property for $3.3 million during the first five years, upon stabilization. 

Arbor Place was built in 1968 and got an addition in 1981, bringing it to more than 34,000 square feet. The facility has 49 resident rooms with a total of 98 licensed beds, comprised of 88 “Nursing Facility” beds and 10 “Personal Care” beds. The seller purchased and re-opened the nursing home in 2008, after the state had required the previous operator to close the facility.

By 2010, Arbor Place had reached a stabilized occupancy of 90% and generated annual EBITDAR of $826,336, on revenues of nearly $5.4 million, for a 15.4% operating margin. However, in April 2011, the facility lost its Medicaid/Medicare certifications again. Its license and certificate of need remained intact, though, as local licensing and regulatory officials saw the need for skilled nursing services in the community, and worked with associated parties to expedite the facility’s reopening under new management.

The Clinton property has a HUD-insured mortgage, and Healthcare Realty Brokerage worked with HUD’s Section 232 Special Assets team to structure a lease-purchase agreement. The property owner’s ongoing debt obligations are effectively covered by Advocat’s rent obligations in accordance with the HUD-approved lease, and the new operator has time to reopen and stabilize the facility’s operations prior to executing the purchase option. 

Written by Alyssa Gerace

Boomers across the nation are facing a harsh reality of declining home value, rising debt, and depleted savings as they approach retirement age with little time remaining to recoup their losses, and the senior housing industry might not want to consider this generation to be their big break, according to a healthcare consultant during Life Services Network’s annual meeting, held last week in Chicago, Ill.

“Don’t count on boomers as the next big customers,” said Andy Edeburn, a healthcare consultant at Minneapolis, Minn.-based CliftonLarsonAllen LLP, during his presentation. 

Boomer finances

He pointed toward the 32% of fifty-plus homeowners who say their home value has declined substantially in the past three years, according to an AARP survey, and the 25% who have exhausted their savings. Credit card debt is a factor for nearly a fifth of this age demographic, too.

Nearly four out of ten of high net-worth Americans approaching retirement admitted in a February 2012 survey released by Nationwide Financial that they haven’t discussed their retirement with a financial advisor at all, despite nearly half of the survey participants saying they are “terrified” of what healthcare costs may do to their retirement plans. 

While this can serve to indicate boomers may not be the next target customer, as they might not financially recover in time, this won’t necessarily be the case.

“The best prospects for a senior living community tend to be planners, those that have always hedged their bet by making good fiscal choices,” says Ken Curnes, Senior Vice President, Planning and Strategy, at advertising and marketing firm GlynnDevins. “The decision to move to a senior living community as a plan to enhance their quality of life and have a defined plan for future healthcare needs is often just the latest of many considered choices they have made in life. That same mindset would most likely have given these individuals a buffer against the recession as their portfolios would most likely have been balanced and/or more conservative by nature.”

When will the “silver tsunami” hit?

Something else to consider is the fact that the first wave of boomer consumers likely won’t hit for about 10 more years, Edeburn pointed out during his presentation. 

This number could in fact be much larger, according to Ryan Frederick, founder of consulting firm Point Forward Solutions, LLC. Right now, the median age of consumers moving into retirement communities is about 83 or 84 (although some communities say their incoming resident age has stayed at about 78 for the past few years, even though the average age of independent living residents has risen to early- to mid-80s).  

The oldest boomers are aged 66 or 67, and if the average age of incoming residents doesn’t change at all, says Frederick, that means there’s still a good 15 years before boomers start moving into retirement communities. 

Further, he points out, if the average incoming age continues to rise, the industry could be waiting nearly 20 years for the first boomers to start arriving. 

Evolving senior living model

This raises another issue. “Separate from their ability to pay for things, how do we know what people are going to want, 20 years from now, given what we know of the boomer generation?” Frederick says. “I don’t think we know what people 20 years from now are going to want… What we do know is probably what they’re not going to want.” 

It might be similar to how cellphones evolve, he continues. Think of what a cellphone looked like 10 years ago compared to what they’re like today. “It’s a lot different now,” he says—and it’s hard to comprehend what new technological developments might look like five years from now, let alone 20.

With dual issues of affordability and an extended consumer timeline, Frederick emphasizes present-day preparation.

“You need to have a viable enough product right now, in order to still be around when the boomers hit. You need to be thriving and existing now,” he says. 

And that’s what many are doing. “From our work with many senior living organizations, we not only see a recognition of [the evolving model], but many examples of how it is already being executed in community design, delivery of services, and evolution of organizational cultures,” said Curnes. “We see those most responsible for acting on this—from owners to developers to architects to lenders—clearly have an understanding of how the product needs to evolve. Some are more visionary than others, but… the field of senior living is clued into this.”

Written by Alyssa Gerace

In the current credit environment, financing through the U.S. Department of Housing and Urban Development (HUD) has become a favorite of borrowers. With its low, long-term fixed rates, flexibility, nonrecourse feature and other benefits, HUD is often the best available option for a borrower seeking to refinance or finance new construction or rehabilitation of a senior living facility.

Consequently, more and more health-care operators and owners are considering HUD to finance multiple properties simultaneously. Financing a portfolio presents different challenges than financing a single property, but if done diligently, the benefits can be ample.

Portfolios Come in Several Sizes

When preparing a portfolio for HUD financing, an important consideration is the size of the portfolio. HUD currently defines a large portfolio as one that contains 50 or more projects and a combined estimated mortgage amount in excess of $250 million. A midsize portfolio is defined as one that contains 11 to 49 projects and a combined mortgage amount of $75 million up to $250 million. A small portfolio is defined as one with up to ten projects and a combined mortgage amount up to $75 million.

The key word in the definitions above is “and.” A portfolio has to meet both of the requirements to fit into the higher portfolio category. For instance, if a portfolio has 11 projects but a combined mortgage total under $75 million it can still qualify for the small portfolio categorization. A small portfolio does not require a corporate credit review, whereas mid-size and large portfolios require a corporate credit review. A corporate credit review is by no means a death knell; however, it is something that most borrowers would prefer to avoid if possible since it adds costs, time and additional work to the application process. Using an experienced mortgage lender for the corporate credit review can minimize the time and work required for this report.

Of importance, HUD is currently contemplating a revision to the definitions for portfolios and the manner in which portfolios are categorized. Under the proposed changes, a portfolio would have to meet only one of the requirements to achieve a certain categorization. That is, a facility that meets the small-size in regard to combined mortgage amount yet has more than the allotted number of facilities would be categorized as a mid-size portfolio and subject to the corporate review. Softening the blow, HUD also is contemplating an increase to the classification thresholds. More specifically, HUD would allow portfolios with up to 15 facilities and $90 million in estimated debt to be classified as small and portfolios with $90 million to $250 million and 16 to 49 facilities to be classified as mid-size. Regardless of if and when these changes take effect, it is vital for a borrower to be aware of its current size classification and prepare accordingly.

Benefits in Numbers

Once a borrower has initiated the application process, they will find there are numerous benefits to financing a portfolio through HUD, the flexibility of prepayment options being one of them. Each facility has its own mortgage and interest rate. That allows the owner to adjust the lock-out period and prepayment penalties for each facility to fit the long-term plans for that facility. While the lender will have an extensive list of information that is needed for each application, there are economies of scale for the borrower when multiple projects are being submitted at one time. The application sections related to the parent entity can be duplicated for all the applications and save the borrower time. In addition, HUD typically assigns a team of underwriters to review and process the portfolio. Thus, when the applications are submitted in “batches,” which usually range between eight to-12 facilities per batch, the same team of HUD underwriters will be assigned to all of the batches. That approach provides efficiency and economies of scale for the lender, HUD and the borrower after the first batch has been processed-resulting in much faster processing times for the remaining applications.

Furthermore, many of the benefits of HUD financing for portfolios are analogous to the benefits of HUD financing for single properties. These include a nonrecourse, fixed interest rate at a time when interest rates are at historical lows and a term of up to 35 years. Also, the mortgages are assumable, so an owner could still do a sale or lease-back with a real estate investment trust (REIT) in the future. In addition, HUD financing eliminates interest-rate risk and renewal risk inherent with shorter term bank financing.

One concern when financing a portfolio with HUD that borrowers should prepare for is the length of time it takes to close a deal. Although the HUD queue has steadily improved and currently does not have a backlog of portfolios waiting for review, the HUD legal review takes longer for portfolios and there could be issues coordinating the closing of multiple loans on the same day.

THM: A Case Study

An example of a successful small-sized portfolio financing can be found in the case study of Tennessee Health Management (THM), an employee-owned organization that manages more than 30 skilled nursing facilities throughout Tennessee and Alabama. THM was seeking a permanent fixed-rate funding structure to refinance 13 of its facilities. To qualify as a small-size portfolio, there must be either 10 or less facilities or a combined total mortgage amount under $75 million. The combined mortgage amount on the facilities was $69 million, thus THM qualified as a small-sized portfolio and did not have to go through the corporate review process.

THM was able to refinance the 13 properties using HUD’s Section 232/223(f) mortgage insurance program. THM’s debt structure included one cross collateralized note for all of its operating entities. The firm was able to allocate portions of the pooled debt to each of the facilities being financed with a HUD mortgage.

The financing was not without challenges. HUD requires the operator to maintain a professional liability insurance policy that complies with its guidelines as it relates to domicile and rating. THM’s non-rated offshore insurance captive structure was not compliant with the HUD guidelines. To remedy this, THM put in place a rated fronting paper that was agreeable to both HUD and THM. This fronting paper provides a policy written by a U.S.-domiciled-rated insurance company to act as a “front” for the captive to comply with HUD’s guidelines.

THM was able to obtain a fixed-rate, long-term financing that reduced its annual debt service and provided a structure without any ongoing financial covenants. In addition, THM was able to use some of the proceeds to fund its replacement reserves accounts for those facilities and perform some capital improvements in conjunction with the refinance.

A portfolio financing through HUD can be a smart move for the right borrower. With its nonrecourse, fixed rate and up to 35-year term and amortization, a HUD portfolio financing can allow the operator to make long-range financial plans without interest rate and renewal risks. Because each facility carries its own assumable mortgage, an operator retains the ability to make strategic decisions, such as selling one of the properties. Additionally, the absence of financial covenants eliminates the need for the borrower to manage to the loan covenants, allotting them even more options. In sum, if done correctly, a portfolio financing through HUD can save a borrower time and money while enhancing flexibility for future strategic decisions.

This article was written by John Hink and Scott Blount, and reprinted with permission from The Capital Issue at www.lancasterpollard.com.

As assisted living regulations evolve and tighten, Medicare and Medicaid reimbursements fluctuate, and healthcare reform begins to take effect, many states are facing their own challenges as they continue to develop, operate, and implement new rules and programs. Here is a collection of long-term care related stories from across the nation.

From the Journal Sentinel—Assisted Living Concepts, Under Scrutiny in Four States, Cancels Earnings Release

“Assisted Living Concepts, the Menomonee Falls chain of assisted living centers, has begun the year with a string of run-ins with state regulators. The company has clashed with regulators in Indiana and Idaho and faced the threat of losing its licenses to operate three centers in Georgia and Alabama,” reports the Journal Sentinel. “On Friday, Assisted Living Concepts disclosed that it had been sued by the landlord of eight of its centers in Georgia and Alabama because state regulators have threatened to revoke the permits for three of the centers. [The announcement] came one day after the company canceled without explanation its first-quarter earnings release and conference call with Wall Street analysts scheduled for Thursday.” Read more…

From California Healthline—Senate Committee Approves Green House Nursing Home Model

“A new idea elbowed its way into the familiar pile of health care legislation in the Senate Committee on Health yesterday. A nursing home model—the “Green House Project”—bucks the cold, institutional feel of many long-term care facilities,” reports California Healthline. “‘SB 1228 is a transformative bill that will eliminate red tape and save money. It is a revolutionary model of care,’ Senate member Elaine Alquist (D-San Jose) said, presenting her bill to the committee yesterday.” Read more…

From Kaiser Health News—Advocates Worry States are Moving Too Fast on Dual Eligibles

“Some states likely will begin testing new ways to care for people who qualify for both Medicare and Medicaid early next year—a timeline that has some advocates urging officials to slow down,” reports Kaiser Health News. “Melanie Bella, the director of the Medicare-Medicaid Coordination Office, said Tuesday that more than half the states have expressed interest in testing new models of care for dual eligibles. Twenty-five states have posted their plans for public comment, and seven already have submitted their plans to the federal government. The first wave of states is expected to go live with their plans in January 2013, according to Bella, who spoke at a panel discussion on dual eligibles held by the American Enterprise Institute.” Read more…

From Pittsburgh’s WTAE.com—Senior Citizens Worry Cutbacks Will Force Move to Nursing Home

“Several senior citizens have expressed their concerns about the possibility of being forced into nursing homes due to cutbacks in Medicaid subsidies,” reports WTAE. A Department of Public Welfare representative called the new rates “a prudent adjustment to rates that have been inconsistent across the commonwealth and even in local areas.” But 27,000 seniors benefit from the program, and if they end up in nursing homes, it will actually cost taxpayers even more money.” Read more…

From Kennebec Journal—Maine Court Approves Giving Patients Alternatives to Nursing Homes

“A federal judge in Maine has approved a settlement in a class-action lawsuit on behalf of people with long-term disabilities who claimed that the state should create opportunities for them to live outside nursing homes,” reports Kennebec Journal. “U.S. District Judge Nancy Torreson approved the settlement Wednesday in a suit brought against the Maine Department of Health and Human Services in 2009…The settlement requires the state to offer home- and community-based services to those individuals who now reside in nursing homes or are at risk of having to move into nursing homes.” Read more…

On April 26, Ventas Realty, Limited Partnership, filed a lawsuit against Assisted Living Concepts, Inc. and its assorted entities, alleging the defendants are in violation of their lease with Ventas Realty due to several ALC entities facing state regulatory actions for violations of regulatory statutes.

Ventas Realty, whose sole general partner is Ventas, Inc. (NYSE:VTR), is the landlord for eight assisted living facilities operated by ALC. The suit lists three facilities located in Georgia and Alabama that have received notices of license or permit revocation hearings as a result of deficiencies deemed detrimental to facility residents, or for not being in compliance with state regulations.

These deficiencies are “jeopardizing the health, safety, and welfare of the residents and… remain unremedied despite previous citations from state health regulators,” Ventas Realty states in the filing. “These regulatory actions threaten permanent revocation of the required operating permits, license, or other authorizations in which, pursuant to the master lease agreement, Ventas has been granted a first priority security interest by the ALC Entities.” 

Based on these notices to revoke the facilities’ operating permits or licenses, Ventas Realty contends that ALC and its entities have defaulted under the master lease agreement, and thus “are in material breach thereof.” 

Assisted Living Concepts, for its part, denies it is in default or in breach of the master lease agreement, prompting Ventas Realty to seek a court declaration of lease violation.

In the lawsuit, Ventas Realty lists some provisions of its master lease agreement with the senior living community operator, including: “Each ALC Entity must comply with all applicable laws and keep all authorizations in full force and effect,” and “Each ALC Entity made a continuing warranty that there would be no threatened, existing or pending revocation, suspension, or termination of any authorization… [and] that it would not commit any act which may give any government authority the right to cause such ALC Entity to lose an authorization.” 

If the ALC entities are found to be in default of the master lease agreement, the terms of the agreement allow Ventas to terminate the lease or the entities’ right to possession to one or more of the leased properties, along with other provisions.

Assisted Living Concepts recently announced it would delay its first quarter earnings release and conference call discussion. On behalf of purchasers of ALC’s common stock, law firm Abraham, Fruchter & Twersky, LLP has commenced an investigation into possible violations of federal securities laws.

The lawsuit was filed in U.S. District Court for the Northern District of Illinois and can be viewed here.

Written by Alyssa Gerace

Nursing home operator Five Star Quality Care, Inc. (NYSE:FVE) saw its net income plunge 91% in the first quarter ended March 31, 2012 to $369,000, compared to $4.1 million in the same period last year, due in part to Medicare reimbursement cuts that went into effect in October 2011. This represents a net income per diluted share of $0.01, down from $0.11 in the same quarter of 2011.

Income from continuing operations dropped to $746,000, a substantial decrease from 2011′s $5.9 million.

Revenues increased 13% to $346.1 million, derived mostly from senior living revenues totaling $276.2 million. Total operating expenses, at $343.6 million, rose 14% to $343.6 million. 

Five Star Quality Care added 13 communities to its leased and owned portfolio compared to the first quarter of 2011, bringing its number of units to 23,765. This represents a 7.2% growth, but the company hasn’t seen as many acquisition opportunities so far in 2012. 

“Compared to last year, our asset pipeline has been relatively slow,” said Bruce Mackey, Five Star’s president and CEO, during the first quarter earnings call. “As we haven’t seen many opportunities that fit our acquisition strategy which to remind you is focused on stabilized, well run, private pay senior living communities in areas where we have a geographic strength of operations.”

Occupancy rose 30 basis points to 85.9% in the first quarter of 2012 compared to the previous year, but was down 30 basis points from the previous quarter. However, based on data from the National Investment Center for the Seniors Housing & Care Industry (NIC), Five Star believes the upside potential for both itself and the industry is “compelling.” 

The operator’s senior living portfolio is mainly private pay, which represents 74.5% of its payor mix, while the remaining 25.5% of senior living revenue comes from Medicare and Medicaid. The Medicare portion decreased from 16% of revenues in 2011 to 13% in 2012. 

From its senior living portfolio, Five Star Quality Care got most of its revenue from its independent and assisted living communities, compared to its skilled nursing properties, at $223.1 million and $53.1 million, respectively. 

The company leases a majority of its assisted and independent living properties and all of its skilled nursing properties, but seeks to make strategic acquisitions when the opportunity arises, particularly for private pay communities. 

“Having experienced a significantly negative impact from the 11% skilled nursing Medicare rate reduction along with the industry, we’ve made up for most of the estimated $16 to $17 million of lost EBITDA to our growth,” said Paul Hoaglund, CFO, during the earnings call. “We disclosed on a new $150 million revolving credit facility which we will use to continue to increase our private payments.”

View the first quarter earnings report.

Written by Alyssa Gerace

Heading into retirement, many boomers are facing economic challenges and uncertainty about how they’ll fund their long-term care. They’re also looking to age in place, but are wondering who exactly will take care of them—at least, that’s the case for Minnesota boomers, found the Minnesota Post in a four-part series it recently ran that painted a portrait of the challenges ahead for the state’s retirees.

Kicking off the series was an article talking about the differences in what retirement looks like for boomers compared to their parents’ generation, including a greater risk shift thanks to the poor economy, and a majority of boomers uncertain as to how they’ll manage their long-term care needs.

Next came a piece touting a trend of boomers “reinventing” themselves after retirement and embarking on “encore” careers. While some choose to begin new jobs that are perhaps in different fields, for some, finding employment post-retirement stems from necessity (think the “risk shift” mentioned in the first article).

Aging in place emerged as a key desire among Minnesotans in Part Three, with many not planning on moving after they retire—a common theme among the state’s residents. And the concept of retirement itself is considered in this article, as a lot of boomers have been forced to keep working even after they’re eligible to retire.

The series ended with a question that’s cropping up in many boomers’ minds: Who will take care of me? And, by extension, how will that care be funded? Along with assisted or independent living communities, getting at-home care by a family or professional caregiver is emerging as an option. But more than 30% of Minnesotans surveyed by the state Department of Health and Human Services simply did not know how they would cover the cost of long-term care, while less than a quarter planned to use personal savings or investments, and about 18% thought they could use a government program.

For more, check out Parts One, Two, Three, and Four.

Written by Alyssa Gerace