Aviv’s roots can be found in a business founded 30 years ago by Zev Karkomi, a real estate investor who pioneered the model of triple-net-leasing skilled nursing facilities to operators. The Chicago-based REIT credits Karkomi with cultivating many of its operator relationships and building its substantial nursing home platform. Aviv has one of the largest SNF portfolios in the U.S., and while it will consider adding other assets in the continuum of senior care, Insoft says his company wants to focus on its core competencies.

Senior Housing News: Healthcare REITs like Ventas, Senior Housing Properties Trust, Health Care REIT, and HCP, Inc., generally get a lot of headlines, but I haven’t heard as much about Aviv REIT—have you been flying under the radar, or do you not garner as much publicity as a private REIT?

Steven Insoft: We’ve been in business for more than 30 years; however, the evolution of our company was very different. We have always been a privately-owned company, but our debt trades publicly.

We’ve evolved quite a bit, and we’ve grown quite a bit. The more you grow, not only are people more aware of you, but you get a certain benefit from people knowing who you are. The comfort the capital markets get with a known entity accrues to your benefit with cheaper capital.

While the mission of the company hasn’t fundamentally changed over the years [since evolving from its predecessor business founded by Karkomi], the capital structure has.

SHN: Aviv deals mostly with skilled nursing, but you’re also looking to diversify to assisted living and other sectors. What’s your strategy, and is there sector in particular you’re targeting?

SI: About 15% of our portfolio is not skilled nursing. We see ourselves having core strengths. Our core strengths follow a couple different avenues: We are expert in inpatient healthcare that involves government reimbursement schemes. We’re also well-versed in issues facing geriatric housing. Those fall along our core competencies.

It would be unlikely to see us start buying up medical office buildings, because they’re not with inpatient health care or geriatric housing. Right now, I see ourselves staying within one or two concentric circles of our competency.

SHN: You only seek triple-net leases. What’s your reasoning behind this, and why don’t you look for RIDEA-structured deals?

SI: The RIDEA structure is an excellent structure. Historically, most of the healthcare REITs bought assets where the underlying returns on the properties like SNFs and acute-care hospitals were sufficiently large to satisfy the REITs expectations, with plenty of property left over for the operator themselves.

You are less likely to see a RIDEA deal done in the skilled nursing space for a couple of reasons: The main reason is, there’s still a sufficient profit margin where there isn’t really a need for the landlord to get involved at an operating level [although some REITs do].

The reality is that, the more you go off and do stuff like this, from an investor’s point of view—look at Ventas’ income statement—it’s less clear what business you’re in. The more RIDEA structures, the more it looks like you’re in the operating business. For us, we’re smaller than many of the public healthcare REITs. We have our billion dollars in assets, but because we’re newer to the capital markets, it would be complicating our interests.

We own 250 properties in 27 states; we net lease them to 36 different operators. We do that with 29 properties. It’s a different operating model. It’s not an indictment of the model; it’s just different. It’s a different risk-return tradeoff.

SHN: What would be your ideal portfolio mix in terms of types of senior housing/care and preferred census (meaning private pay residents vs. Medicare/Medicaid)?

SI: We disproportionately like government reimbursements. We actually take some comfort in it because of the longevity in the systems, even though it can be bumpy year to year. We tend to be a little bit unorthodox in terms of how we look at those things. I’m less worried about there being a magic number; what I want to make sure of, is that as an investor, I paid properly for what it is I own.

In the last couple of years, the financial markets have put a very high premium on skilled nursing facilities that have high Medicare revenue mix. While I think that those buildings are, net, more valuable than buildings that don’t [have high Medicare revenue], I think the market over-prices the value of the Medicare reimbursement. In absolute dollars it’s better, but they’re putting a higher multiple on it.

To me, you’re doubling down your risk, because although I find high Medicare census to be net more attractive, I want to pay a less aggressive multiple for that cashflow.

I don’t want to buy properties on a linear relationship; if a building is 80% more profitable, I don’t want to pay 80% more for it. Right now, the market is paying more for that asset, and putting a higher multiple on it. We give some pause to that.

More private pay and Medicare is better, but I gotta make sure I didn’t overpay for the asset in order to achieve it. I’d rather pay a more modest level and have my operators drive revenue. The value proposition of our business to us is not the real estate. It’s the operator. It’s not about, ‘Do I think the building will perform well?’ The operator has to perform well.

SHN: Do you look for opportunities in turnaround deals?

SI: Sometimes real estate can get in the way of profitability. We don’t really like to buy turnarounds. REITs generally like to buy properties that can cover rent from the get-go. But I might look at a property that looks like a value-add play. The real estate isn’t the problem, but the existing manager is the problem. But I don’t want to buy real estate that’s poorly performing because the market, or the physical plant, is causing that to happen.

SHN: In 2011, your portfolio had an average 74% occupancy rate. The industry average for skilled nursing is about 88%. Why is yours so comparatively low?

SI: Our occupancy is at 83% for our skilled nursing portfolio, and it has been very consistent; it’s not like it was 88% and it fell to 74%. If you look at the skilled nursing census, you need to look at it state by state. At the inception of the Social Security Act, states became responsible for determining how licenses are rationed for healthcare facilities.

There are two kinds of states: Those where the licensure requires certificates of need (CONs); and states that don’t. What happened was, 45 of our buildings are in states without CONs;
Texas, for example, has an average census of about 70%. Coastal states tend to be CONs, and have higher occupancy.

Aviv has a history of buying facilities in states with below-average census, but we might start giving back the licenses; it’s an optical impairment. It’s a perceived value indicator; people like portfolios that are fully occupied. Many of the buildings are actually not designed to house the number of people it’s licensed for, and what happens over time is these buildings aren’t used the same way. Operators don’t care about optics of the census.

We’re thinking through strategy to reduce licensed bed capacity, because we have too much capacity in our beds on a licensed basis. We’re going to programmatically go through our portfolio and shed some licensure that is no value to us or our operators. It’s nominal capacity that’s misleading.

SHN: Aviv REIT did about $660 million of acquisitions between ‘05 and ‘11. But you did about a third of those acquisitions in 2011 alone, with more than $220 million in deals. What happened?

We recapitalized our business in the Fall of 2010; we partnered with a private equity firm in New York, Lindsay Goldberg, LLC. They’re providing us with capital to fuel the growth. We see our 2011 experience being more of an indicator of things to come, than what our activity had been in the past five years.

We have more capital to invest, more resources dedicated to the effort. We’re creating more avenues for capitalization and growth. We’re not going to compromise our underwriting standards or the folks we like to lease our properties to, but we do think we can invest at a slightly faster pace, more along the lines of 2011.

SHN: Will Aviv evolve into buying or investing in other property types?

SI: We probably want to get a bit larger. In our portfolio, 15% is not skilled nursing; we do own other healthcare in geriatric housing/asset types. We’re developing a couple [assisted living] properties in Fairfield [County, Connecticut], so it can’t be out of the question as far as doing it. But I think it’s going to be a small part of our story during the next stage of growth, the next doubling of our asset base (to $2 billion).

As we get larger, our cost of capital might afford us to be a little more competitive in some of our other asset classes. It’s about making sure we’re buying things we understand. It’s possible—even probable it will happen over time, but won’t be a meaningful part of our story. We stick to what has worked for us.

SHN: Do you prefer new construction, or existing properties, for investing?

SI: We start with finding operators, and then we find real estate for them to operate. We’re working on six new construction projects—two assisted living facilities, and four skilled nursing facilities. Three of the four SNFs are replacement projects.

We’re going through our portfolio to find aging stock, and replace it ourselves. An old building might be in a good market, but the building is challenged. We’re more apt to do new construction with people with whom we have a portfolio relationship already. There’s a risk element to it that it’s generally best merged with an existing portfolio relationship.

Although just 4% of the 65+ demographic live in long-term care facilities, this number nearly quadruples to 15% of the 85+ crowd.

Written by Alyssa Gerace

A recent interview from National REIT Investor takes a look into the future of the REIT as an investor in multifamily housing, including what’s on the horizon in terms of pricing.

Green Street North American REIT manager Jim Sullivan shared his “30,000-foot” perspective with the publication.

National Real Estate Investor reports:

REIT Insider: Multifamily has been on a terrific run—in fact, some reports suggest the sector is getting overheated. What are your thoughts on multifamily REIT valuations—is there still room for growth or are they at peak pricing?

Sullivan: The supply/demand picture in the apartment business makes it a great time to be a multifamily landlord. However, rent growth has dramatically outpaced income growth, so some slowing of the torrid growth pace is to be expected. What happens in the single family market over the next two to three years could have a major impact on apartment operating fundamentals and values.

REIT Insider: Most REITs have cleaned up their balance sheets significantly and are in pretty decent financial shape. What do you see as the biggest threat to REITs today?

Sullivan: The biggest threat to REITs today is balance sheet complacency on the part of management teams. While REITs are generally in strong financial shape, some companies still have far too much debt on their balance sheets. In several studies levered REITs consistently fail to deliver higher returns to justify their added risk.

Read the full interview from National Real Estate Investor.

Written by Elizabeth Ecker

“At its core, credit ratings provide transparency and third party verification for investors in this space, which helps to provide greater access to capital to the extent that financings are being undertaken and also provides a more economical or lower cost of that capital, i.e., lower interest rates, better terms and those types of things,” said Nick Gesue, moderator of the online conference, “Make or Break: The True Value of Credit Ratings,” sponsored by publisher Irving Levin Associates. Gesue is chief credit officer at Lancaster Pollard, a firm providing capital to the senior living, healthcare and affordable housing industries.

“Looking at accessing capital,” Gesue continued, “nonrated organizations have much more limited access to capital, and when and if they do access capital as a nonrated organization their cost of that capital can be quite significant.”

Beyond capital, two other senior living executives talked about deriving economic value from credit ratings in both direct and indirect ways, and using ratings to compare company performance to both competitors and the industry as a whole. Additionally, the director of Fitch Ratings’ public finance healthcare group said a relationship with a ratings agency can help companies with their strategic planning by gaining a rating agency perspective. 

Read more at Healthcare Finance.

Written by Alyssa Gerace 

The 208-unit independent living community has been renamed Peninsula Del Rey. Located at 165 Pierce Street in Daly City, the community opened in October 2011. 

“While we’ve been serving seniors for more than 20 years, we are excited to provide this new, purpose-built community with the wide range of programs and resources that meet the individualized requirements of the local marketplace,” said Michael Grust, SRG president & CEO, in a statement. “With experience serving the Bay Area, we understand their needs and can deliver the exceptional service they deserve.”

Peninsula Del Rey represents SRG’s eighteenth property and solidifies the company’s presence in California. Seven of its properties are now located in California, with another seven in neighboring Arizona. 

Going forward, SRG plans to continue growing through a strategy that includes ground-up development, strategic acquisitions, and management. 

Written by Alyssa Gerace 

That engagement revolves directly around finding out what people want, said Margaret Wylde, president and CEO of market research firm ProMatura Group, speaking before attendees of ALFA’s Community 2012 event in Dallas Wednesday.

Residents Know Best

To demonstrate the importance of engaging with prospective residents and their families, the market researcher spoke directly with a panel of people who either currently live in senior living communities or have helped a loved one find a place to live.

A community must be able to offer a lifestyle that provides each resident with what they consider to be a “great day,” Wylde said.

For some, that might mean being able to cook or have access to a full kitchen. Others look for volunteer opportunities and ways to stay active, while some treasure having a wide array of activities available to them—without being forced into participation.

Having the freedom to go outside the community and being able to maintain a level of independence is also important.

“Just because you live in a senior living community does not cut you off from what goes on in the rest of the world,” said one senior panelist.

Another resident valued the suggestion box at her community, saying that residents’ suggestions are at least considered, even if they’re not implemented—and they appreciate that.

When asked what they would change about their experience, one panelist, whose mother lives in a retirement community, suggested having a “buddy system” for incoming residents, so when a new person moves in, a volunteer is assigned as his or her “buddy” who can then show them the ropes and introduce them to others.

There was consensus among residents that it’s important for those living in independent, or unassisted living, to truly be independent.

“If they need help, they shouldn’t be there,” one panelist said. Another agreed, and suggested that communities should meet prospective residents—not just their families—before allowing them to move in, to make sure it’s a good fit.

The First Impression Lasts Forever

Before living in a community comes the decision to move in, and a potential resident’s first impression is critical, according to Wylde.

“Those first few seconds on the phone, the first few minutes in a community—you lose most of your customers in that time period,” she says.

Many people considering moving into a retirement community gravitate toward their friends, and attach importance to existing residents’ recommendations. Generally, only a satisfied resident will recommend his or her community, Wylde says.

That highlights the importance of happy residents. If a prospective customer walks into a place where residents don’t appear to be happy, it’s unlikely to persuade that potential consumer to move in.

One adult child who was looking for a place for her mother spoke about an experience she had during a visit. The residents she saw didn’t look like they particularly wanted to be there, and while the staff was friendly, they were also aggressive and “pushy” regarding when her mother would want to move in, she said.

That’s something to watch out for, Wylde advises.

“The pressure we put on our sales folks can sometimes serve to drive the customers away,” she says.

A community’s staff has to be on top of their game all of the time, the researcher continued. Being “super aggressive” is not the way to present a community.

It’s also important for staff to direct attention to not just the family seeking a place for their loved one, but to the potential resident as well. Overlooking or ignoring the person who will actually be moving in to the community is very insulting, a panelist shared.

One senior living resident on the panel shared a positive experience of a visit, where the person showing him around seemed genuinely invested in the community and was excited to conduct the tour. “It’s almost like it wasn’t a business; it was like she was inviting us into her home,” he said.

And that, Wylde said, is how it should be.

Written by Alyssa Gerace

This article is sponsored by the Assisted Living Federation of America (ALFA) as part of its efforts to advance excellence and explore topics impacting the future of senior living. For more information about ALFA, visit www.alfa.org.

HUD said it was raising premiums to provide “additional protection” for the General Insurance/Special Risk Insurance Fund, increase receipts to the Treasury, and encourage private lenders back into the market by offering less competitive terms.

But the trade groups aren’t content with those reasons.

“The purpose of the MIPs is not to increase receipts to the Treasury, nor to adjust FHA’s pricing of credit risk relative to current private market pricing,” the trade groups wrote in the letter. “Increasing the MIPs will not serve to build a buffer against future losses, because there is no segregated fund and excess income is returned to the Treasury each year.”

Additionally, raising those premiums will serve to add to property owners’ costs which in turn will force rents still higher—especially in the current economic environment, the the letter pointed out.

The groups also disagrees with HUD’s plan to funnel funds from higher premiums (above what is actually needed to operate the programs) into the Treasury.

“We believe that such action sets a precedent for poor public policy making and has a significant negative impact on national housing policy,” the letter reads. “We do not support raising the cost of producing rental housing and health care facilities to raise money for purposes unrelated to these programs.”

Beyond that, data regarding the Federal Housing Administration’s role in the multifamily market “demonstrate that FHA is operating as it was designed to operate, providing liquidity when other market participants are pulling back and decreasing its market share as other lenders return to the market.”

The mortgage insurance premiums are supposed to be based on managing the government’s risk of the potential and severity of mortgage losses, and that’s how it should continue to be, according to the housing and mortgage associations, and HUD isn’t supposed to adjust its pricing relative to current private market rates, or to increase funds for the Treasury. 

The fact that many multifamily mortgage insurance programs have demonstrated a strong performance and have already undergone changes for tightening credit reviews,  underwriting, and loan requirements all runs counter to HUD’s reasoning for raising premiums, according to the associations.  

Ultimately, the letter urges HUD to maintain mortgage liquidity by not implementing changes at this point.

Read the full letter here.

Written by Alyssa Gerace 

To help accelerate the work, the President’s proposed FY 2013 budget provides a $100 million increase for efforts to combat Alzheimer’s disease. These funds will support additional research ($80 million), improve public awareness of the disease ($4.2 million), support provider education programs ($4.0 million), invest in caregiver support ($10.5 million), and improve data collection ($1.3 million).

“These actions are the cornerstones of an historic effort to fight Alzheimer’s disease,” said Kathleen Sebelius, Secretary of HHS. “This is a national plan—not a federal one, because reducing the burden of Alzheimer’s will require the active engagement of both the public and private sectors.” 

Sebelius also announced the funding of two major clinical trials that were jumpstarted by the National Institutes of Health’s infusion of addition FY 2012 funds directed at Alzheimer’s disease.

The funds will go towards the development of new high quality training and information for clinicians and a public education campaign and website to help families and caregivers find the services and support they need. 

• Research – The funding of new research projects by the NIH will focus on key areas in which emerging technologies and new approaches in clinical testing now allow for a more comprehensive assessment of the disease. This research holds considerable promise for developing new and targeted approaches to prevention and treatment. Specifically, two major clinical trials are being funded. One is a $7.9 million effort to test an insulin nasal spray for treating Alzheimer’s disease. A second study, toward which NIH is contributing $16 million, is the first prevention trial in people at the highest risk for the disease.
• Tools for Clinicians – The Health Resources and Services Administration has awarded $2 million in funding through its geriatric education centers to provide high-quality training for doctors, nurses, and other health care providers on recognizing the signs and symptoms of Alzheimer’s disease and how to manage the disease.
• Easier access to information to support caregivers–HHS’ new website, www.alzheimers.gov, offers resources and support to those facing Alzheimer’s disease and their friends and family. The site is a gateway to reliable, comprehensive information from federal, state, and private organizations on a range of topics. Visitors to the site will find plain language information and tools to identify local resources that can help with the challenges of daily living, emotional needs, and financial issues related to dementia. Video interviews with real family caregivers explain why information is key to successful caregiving, in their own words.
• Awareness campaign – The first new television advertisement encouraging caregivers to seek information at the new website was debuted. This media campaign will be launched this summer, reaching family members and patients in need of information on Alzheimer’s disease.

 Written by John Yedinak

While not everyone is looking for a community that allows pets, some are seeing that more than a quarter of residents will bring them, if they are allowed. And they are not limited to cats and dogs, AP reports.

Pet-friendly living centers are still in the minority, so people who don’t like animals will easily find centers that say “No Pets Allowed.”

But some living centers are cultivating small menageries.

At the Silverado Senior Living center in Encinitas, 25 miles north of San Diego, residents have miniature horses and for several months every year, a very young kangaroo, said Steve Winner, co-founder and chief of culture for the company’s 23 centers in six states, including Illinois and Texas.

They’ve had a pot-bellied pig, chinchillas, guinea pigs and even a llama until he got too big, said Winner, who estimated that 20 percent of their new residents move in with pets.

When it’s time to walk the dogs, a staff member might play “Who Let the Dogs Out” by Baha Men as a signal that it’s time to put leashes on the dogs.

Kogan founded a prototype program called Pets Forever, a Colorado State class where students earn credits while helping elderly and disabled pet owners care for their animals.

Read the original article.

Written by Elizabeth Ecker

The awards encompass eight categories, listed below with the winner of each: 

• Resident Health & Wellness—Senior Living Communities, based in Charlotte, N.C.
• Supporting Residents & Families—Senior Lifestyle Corp., based in Chicago, Ill.
• Resident Dining Experience—Brookdale Senior Living, based in Brentwood, Tenn.
• Technology Adoption—Joint winners: Pathway Senior Living, based in Des Plaines, Ill., and Yardi Systems, based in Santa Barbara, Calif.
• Risk Management & Injury Reduction—Emeritus Senior Living, based in Seattle, Wash.
• Sales & Marketing—Five Star Senior Living, based in Newton, Mass.
• Human Resources & Staff Development—Joint winners: Emeritus Senior Living, Aegis Living, Leisure Care, and Merrill Gardens 
• Physical Plant & Environmental—Silverado Senior Living, based in Irvine, Calif.

For more information on each of the categories and the recognized companies, click here. Congratulations to this year’s winners!