Senior Living Capital Providers Ask Tough New Questions of Operators

When it comes to securing new capital, company culture and staff training may be more important than many senior housing providers realize.

It’s always been critical to invest in high-quality senior living staff, industry leaders agreed during a Wednesday session at the National Investment Center for Seniors Housing & Care (NIC) 2017 Fall Conference in Chicago. But now, more than ever, failing to do so—and failing to create a welcoming company culture—could very well cost a senior living provider valuable capital in the long-run.

That’s how KeyBank Real Estate Capital sees things, according to Brian Heagler, a senior vice president and senior banker with the company.


“Don’t be surprised if your lenders are asking you questions around [staff] training and culture,” Heagler told the room’s senior housing providers. “We’re making those kinds of assessments as we’re deciding who we want to partner with and provide capital.”

Culture reigns supreme

Company culture didn’t always rank highly in terms of a provider’s ability to secure capital from banks or other sources. Heagler, who’s been lending to senior housing companies for about 11 years, believes culture began gaining importance recently.


“I’m asking questions [of providers] that I wasn’t asking five or six years ago,” he explained.

Providers’ company cultures are also proving increasingly important to senior housing owners, Eric Mendelsohn, president and CEO of Murfreesboro, Tennessee-based real estate investment trust (REIT) National Health Investors, Inc. (NYSE: NHI) noted during the panel session.

“We love to see investment in culture,” Mendelsohn said. “But, as a REIT, we don’t have a direct way to support that.”

Other REITs, like Toledo, Ohio-based Welltower, Inc. (NYSE: HCN), have found ways to directly invest in efforts to improve the culture at senior housing businesses, despite not operating any senior housing themselves.

“Welltower actually has made some direct investments,” Mercedes Kerr, executive vice president – business development at Welltower, explained. “We support a training module that happens every year at Cornell University— we help organize it and help fund the program. We do the same with a certificate program that USC has at its School of Gerontology.”

Mythical ‘perfect business’

Beyond creating a culture and training staff, there are plenty of concrete steps providers can take to enhance their operations and ensure their investors receive a healthy return on investment (ROI).

Welltower, for instance, has had almost 200 of its senior housing properties undergo LED retrofits, which cost between $50,000 and $80,000 per property, Kerr said. After the initial investment, though, senior housing providers end up saving all of the time they would have spent changing lightbulbs, and Welltower typically makes its money back within two years.

Investing in things residents may not necessarily ever notice is also an important thing to do, Mendelsohn argued.

“NHI is a big fan of stealth investments,” he said. These can include back-up generators, for instance, or other investments that help to guarantee a community’s success.

All in all, when it comes to perfecting a senior housing business, a provider’s job is never done, added Thomas Wellner, president and CEO of Ontario, Canada-based senior housing provider Revera, Inc.

“I fundamentally believe that you can never run a perfect business, so you always need to enhance what you do,” he concluded.

Written by Mary Kate Nelson

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