Different types of buyers in the Senior Housing Market

There are many types of buyers in the senior housing market and sometimes it can get confusing for sellers to know who they are really dealing with.  While it is great to get a high-price offer for your community, if the buyer doesn't have the ability to close, it is doesn't matter how good the offer is.

There are four main types of buyers:

1.       Real Estate Investment Trusts (REITs) – REITs are publicly or privately traded real estate companies that typically have ample cash available to acquire properties.  Most of the time REITs buy a community and at closing, sign a long term NNN lease with a local or regional operator to operate the community.  REITs typically buy with cash. 

2.       Private Equity Companies – They come in all different sizes from multi-billion dollar companies like the Carlyle Group to much smaller companies.  Private Equity companies typically buy properties and use a management company to operate them.   Private Equity companies typically buy with cash or with a large line of credit.

3.       Local and Regional Operators – Local and Regional operators may own/lease 5-50+ communities.  They may use a REIT or Private Equity company as a partner or may buy a community on their own.  If they are buying a community on their own, they typically use bank debt and raise equity internally with high net worth individuals, and through friends and family.

4.       “Mom and Pop” Operators – They typically own from 0-5 properties.  Most REITs and Private Equity companies will not partner with Mom and Pop operators because they are too small and the communities they operate are not large enough.  They typically buy with personal equity or friends and family’s equity, and bank debt.

As a seller, it is important to understand what type of buyer is making an offer to buy your community and how they plan to financing the purchase.  Far too many buyers try to put communities under contract to buy, and THEN try to find the equity and debt.   This often times lead to delays in closing, cancelling the offer to purchase, or retrading at a lower price.

At Senior Living Investment Brokerage, Inc. we have relationships with over 1,700 of different types of buyers and can help you understand what type of buyer is making an offer, their track record in closing deals and how they plan to finance it.

For more information on selling your community, contact Jason Punzel at 630-858-2501 x 233 or punzel@slibinc.com.

Private Equity not so Private anymore

The Seniors Housing market is as strong as ever. Many private equity groups have been hunting for places to put money to work. While the debt crisis in Europe and lackluster economy has chilled private equity's interest in commercial real estate, Senior Housing continues to be a lucrative, safe bet. Capitalization Rates have remained stable despite volatility in other sectors/markets.

The biggest problem is that private equity looks for portfolio transactions versus smaller, one-off deals. The bigger the deal, the bigger the return. There is a shortage of those deals, if any out there.

I predict that smaller private equity funds are going to look for individual assets to purchase. They can buy individual properties at an attractive price, assemble a sizable portfolio one property at a time, then sell for a portfolio premium.

If you are an owner of nursing homes or assisted living facilities, now would be an ideal time to look into selling. Since private equity groups don't operate, a sale-lease back or sale-manage back transaction might be a good option. For those looking to sell and get out of the business, many private equity groups are already aligned with operators.

Please contact Ryan Saul at 630-858-2501 to discuss if now is a good time to sell.