In a development climate that is still plagued with limited credit and sometimes-unconventional financing, some senior housing developers are starting to look into individual projects that combine public benefits and private capital for a mutually-favorable deal.
The deals often present solutions that result in senior housing developments or rehabs, but they can require the participation of several entities. For the right partnerships, the capacity to combine a public property or facility with financing or operations from a private company can provide a positive outcome for all parties, even if the opportunities are not yet commonplace.
“The mix between public and private is getting blurred,” says Marc Cabrera, Managing Director and head of Healthcare Investment Banking at Morgan Joseph TriArtisan.
But that combination of private and public capital that can sometimes change the importance of the tax structure of the deals, as there are often there are public tax incentives, but they come with restrictions.
In the case of some publicly-funded hospitals, Cabrera says, capital is part of the equation, but there are other considerations as well.
“What is the mission of the larger organization?” he says. “It’s still important, but it’s not the only decision.”
The deals aren’t exactly commonplace in the senior housing sector, but some companies have seen success in this particular type of senior housing development partnership.
“It’s a minor trend in the space,” says Dan Hermann, senior managing director and head of investment banking for Chicago-based Ziegler, noting that Ziegler has not yet been active in private/public projects, but is doing research in the space. “It’s usually in a crowded urban market or an area that needs moderate to affordable senior housing.” It might involve working with a municipality, Hermann says, or finding a publicly designated parcel of land for the building type.
Several developers are seeing success in the projects, Hermann says, but it may be too soon to call the developments a “trend.”
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“A lot of people are trying to figure out these tax credit deals,” Hermann says, noting that they’re almost always affordable housing units in urban areas. “Cities are motivated to keep seniors and get creative.”
Written by Elizabeth Ecker