Financing Senior Living Facilities: Harnessing the Power of REITs

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Thinking of expanding your senior living properties, but worried about finding financing?

Consider aligning with a REIT.

A Real Estate Investment Trust (REIT) is, according to Investopedia.com, a “security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages.”   Healthcare REITs invest in senior housing, assisted living facilities, independent living/continuing care retirement communities, life science, medical office, hospital and skilled nursing facilities.

A recent article (May/June 2012) in Senior Living Executive, in fact wrote that 2012 has “been called by many in the senior living business ‘The Year of the REIT,’ because REITs rushed in where private equity lenders feared to tread.”

The number of REITs investing in senior living properties increased greatly between 2010 and 2011, with “the overall dollar volume of publicly announced housing acquisitions top(ing) $16 billion, about 40% higher than 2010….”

So if you’re interested in pursuing a partnership with a REIT in order to meet capital and operational goals, follow the tips below, as suggested by the Senior Living Executive article:

  • Understand how to make yourself attractive to REITs, who look for well-run operations that provide healthy margins.  In addition, REITS  look for “high customer service ratings, reputation for innovation, quality outcomes, and prove ability to drive growth over the long term”
  • Have a “clear vision for company goals,” since REITs aren’t looking for fly-by-night operators.
  • Learn all you can about your potential REIT partner(s) in order to learn whether or not the partnership is a good fit for your facility’s long-term goals.   This can mean “mean studying and communicating with a REIT for years before pulling the trigger,”
  • Make sure your price and terms are realistic. Just like homeowners who decide to sell a home themselves, many senior living owners tend to price their properties too high.
  • Don’t forget to get feedback from your employees, residents, their families and any other “equity partners for their opinion on the pros and cons of the deal”.

Have you considered partnering with a REIT? If so, write about it here.

In the meantime, we hope you’ve bookmarked our Snelling Medical Blog and that you’re enjoying the tips and strategies we offer here. Check back next week when we’ll offer tips on managing a multi-generational staff. If you have any questions at all, contact us!

NOTE:  A full-color, downloadable PDF is available.