Moderator: Jason Smeck, Managing Director, RED CAPITAL GROUP

Speakers:

Paul Mullin, Vice President of Development, Silverado
Ryan Novaczyk, President & CFO, New Perspective Senior Living

By:  Brittany Robinson, Health Care REIT

Once you’ve completed a single-asset acquisition, how do you successfully integrate the new property into your existing property portfolio? This article focuses on strategies operators can employ to successfully integrate an acquired property into their existing portfolio. Two leading operators share their insights and identify some of the challenges they’ve faced such as employee integration, policy and procedure as well as systems transitions, and driving NOI growth.

The operators discussed the key challenges that need to be considered during a property acquisition as well as the strategies and processes that could be employed upfront to better ensure a seamless integration following the property’s acquisition. The panel’s discussion unfolded in following four areas.

Primary Challenges of Single-Property Acquisitions

The first item covered the primary challenges of single-property acquisitions, which include buying in a seller’s market, often needing to stretch in price to make a deal, working with imperfection, tight due diligence time frames, the need to compromise, and understanding the community’s staff and residents. 

Factors for Success

Factors for a more successful post-acquisition integration include good financial modeling (especially important if stretching for a deal), completing a multi-discipline due diligence review, obtaining a thorough understanding the asset, incentive alignment, and managing communications. If the seller is withholding information, this is likely a red flag. Performance incentives are very useful for turn-around communities to make sure interests are aligned between the owner and the operator.

Important Items to Investigate During Due Diligence

Important items to investigate during a due diligence include deferred capital expenditures, the market’s supply and demand, resident assessments, staff evaluations, past financials (making sure to protect yourself from loss runs), projections (making sure to check assumptions driving the budget), and project positioning. Your financial partner should be able to help you with a physical plant checklist. 

Closing on the Acquisition

The integration’s plan development and implementation are critical to the acquisition’s closing. This includes managing timelines, systems integration and training, addressing specialized care services, employee hiring or terminating, implementation of pricing changes, repositioning of the asset, recapturing capital investment, and incentivizing. If you are acquiring a property in a new state, it is important to understand that state(s) regulations and rate reimbursement structure.

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