Moderator: Richard Lerner, Partner, Housing & Healthcare Finance

Speakers:

Boyd Gentry, President, Gentry Associates

Christopher Hyldahl, Managing Director, Blueprint Healthcare Real Estate Advisors

Gregory Stapley, Chairman & CEO, CareTrust REIT

By:  Nevan Shokar, Health Care REIT

In the current landscape with institutions buying portfolios at record prices, new investors wanting to find undervalued assets, and industry players with costs of capital across the board, how can you make sure you’re talking to the right people and negotiating the right price? A panel with representatives from a REIT, a broker, a lender and an operator, reviewed two different assets – a skilled nursing and a seniors housing property. Sharing how they value properties, and examined how their analyses compare and where they differ. 

Throughout the panel each speaker discussed their opinions on the key factors in determining the value of a skilled nursing or seniors housing asset.

Richard Lerner, representing a lender’s perspective, claimed that location is the key factor. No matter how difficult of a situation the asset is in, the location is fixed. Lerner believes that location is an underappreciated factor since you can almost always figure out a solution to other issues. Next, Lerner believes that it is who you lend to, not what you lend to. The quality of the operator and having the trust in them to deliver results is crucial in valuing both skilled nursing facilities and assisted living facilities.

From a broker or advisor’s perspective, Christopher Hyldahl said that historical and current financial performance trumps location, citing multiple sales he has made where poorly located buildings with massive cash flows sold at similar multiples as those in great locations. From his perspective, the location is the second most important factor with considerations to the reimbursement environment, CON, and whether there is a moratorium in place.  

Turning to the REIT investor perspective, Gregory Stapley believes that certain factors are universal and essential to valuing assets. First, he believes the quality of the operator (reputation, staff turnover, quality of care) affects value over time for both skilled nursing and assisted living. The second and third universal factors would be the operating performance (yield, lease coverage) and the physical plant (condition, maintenance, location, and quality), respectively.

Finally, from an operator’s perspective, Boyd Gentry said the greatest factor was historical cash flow trends and how the cost of operating overlays with past performance. A secondary factor would be how the change to revenue mix will impact the total cash flows generated by the facility. And the third factor that Gentry would consider is how much of the value creation does he will ultimately have to pay for up front. 

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