With seniors housing and care facilities re-opening their doors to visitors, albeit often with restrictions, lenders are regaining an invaluable tool to evaluate properties: the in-person site visit. Site visits are critical to the underwriting and asset management of seniors housing and care loans because they allow lenders to gather information about the physical condition of a property, observe the daily operations at the building, and meet the leadership in charge of a facility’s success.

For much of the past 18 months, lenders often had to conduct virtual site visits as the result of restrictions imposed due to the pandemic. That has changed in recent months, however, as in-person site visits have become more common, a welcome shift in the eyes of lenders as there is no substitute for the firsthand knowledge gained from an in-person site visit. The process is simply more thorough, and for both lenders and operators alike, preparation is key to a successful site visit.

How Lenders Prepare

The process typically begins with a thorough financial analysis of historical and recent financial statements and a comprehensive review of third-party sources of information such as appraisals, project capital needs assessments (PCNAs), prior physical inspections, and past state and federal regulatory inspections or surveys. Collecting and analyzing that information ensures that a lender is familiar with the property, has noted past instances of deferred maintenance, and is aware of any clinical or operational issues before arriving onsite. During the visit, a lender will confirm that any prior findings of deferred maintenance have been corrected and will assess future capital expenditure needs.

In addition to the financial and third-party information evaluation, a lender will conduct an analysis of the clinical operations of a facility. This focuses on resident census, case mix, and any notable changes or trends. A prudent lender will prepare pertinent questions and discussion points in advance of the visit that will inform the dialogue and interview portions of the process. The analysis ensures the time spent onsite will be productive for the operator and the lender. An effective clinical analysis provides administrators, directors of nursing, and other key leadership with a third-party perspective and an opportunity to evaluate operational strengths and weaknesses, and identify areas for improvements in staffing, quality, case mix, and referral sources.

A successful site visit will include an evaluation of the physical condition of the property, its curb appeal and marketability. This includes conducting comparisons to the closest competitors in their primary marketing area, examining the surrounding areas and neighborhoods, and evaluating the accessibility of the property.

How Operators Can Prepare

In addition to common preparation practices like scheduling interviews, informing residents, and providing multiple points of contact, operators can focus on the following areas to enhance their readiness:

  • Compile key property and operational information. Key information includes things such as current census and occupancy reports, floor maps, current licenses, building certificates, sample marketing materials, fee schedules, reimbursement rates, and staffing information.
  • Know your census. Be prepared to discuss in detail the census drivers for the facility. This includes the number of admissions per month, referrals patterns by local hospitals, average reimbursement rates, and length of stay by payor type.
  • Prepare staffing data. Be prepared to provide specifics on daily staffing patterns by shift and any open positions or contracted labor usage. This information can be combined with average wages scales to further analyze how a facility compares to its competitors.
  • Plan for personnel. Plan for the availability of necessary personnel to provide information as well as access to secured or locked areas during the physical inspection of the property. For example, arrange for the maintenance director to participate in the inspection to identify unique characteristics of the property and potential critical capital needs or repairs that may need to be addressed prior to loan closing.

Through the interview and physical inspection portions of the in-person site visit, a lender will have gathered ample valuable information about the physical and operational aspects of the facility. This in turn will help the lender best position the facility for long-term success. Operators that are well-prepared and have a good understanding of the goals of the lender are more likely to enjoy a favorable experience that reaps substantial benefits.