Favorable demographic tailwinds are creating an unprecedented launchpad for emerging operators within the seniors housing and care sector. As the affluent baby boomer generation ages into retirement, it is expected to drive decades of sustained demand. Consequently, the current market presents a strategic entry window for new market participants to develop operational expertise and systematically acquire seniors housing communities before structural demand peaks.
To explore this concept in depth, McKnight’s Long-Term Care News Senior Editor Kimberly Marselas brought together Lument’s Head of M&A Laca Wong-Hammond, HouseWorks Founder Andrea Cohen, and former chief investment officer at Sabra Health Care REIT Talya Nevo-Hacohen for the webcast “Taking Command: Navigating Your First Deal,” part of McKnight’s Women in Business Boot Camp. The panel discussed how new seniors housing operators can identify off-market deals, find suitable capital partners, and pursue opportunities despite having a limited track record.
Operational Expertise
The importance of gaining operational expertise cannot be overstated. Running a seniors housing community day-to-day while caring for residents presents distinctive and substantial challenges. It is a complex endeavor that requires knowledge of both clinical and financial operations.
When it comes to education, nothing beats working in a community and learning from experienced professionals. This hands-on experience is an effective way to understand the risks involved and could create an opportunity to join a family business that is preparing for succession. Selling to an insider is often an effective strategy for all parties.
Once at a community, Wong-Hammond recommended a dual-track optimization roadmap consisting of high-utility, practical improvements, as well as longer-term systematic changes to attract investors. She cited examples of “low-hanging fruit” such as transitioning from paper billing and word-of-mouth marketing to a digital infrastructure which can yield immediate lift and demonstrate instant credibility with investors.
“You can sell things like a newer EMR system, digital marketing campaign, scheduling improvements; it’s about telling your story that is not pie in the sky, but instead taking steps that are realistic,” Wong-Hammond said.
Opportunities for Newcomers
Panelists agreed that opportunities exist in a competitive environment if investors know where to look. Those near the beginning of their careers and still building a book of business are unlikely to compete with large institutional buyers and REITs for bigger, high-profile deals. Instead, newcomers can look elsewhere for compelling one-off transactions. Wong-Hammond noted that although competing with large buyers for high-unit-count facilities can be difficult, opportunities to acquire facilities with 20 to 60 units remain plentiful.
Another strategy is to identify underserved segments, such as affordable seniors housing or multigenerational living, and build expertise in a specific industry niche. Succession is another prudent approach, as many independent owners and family-owned companies are seeking to exit the business after several decades. Entering early, learning the business, and assuming operational responsibility before taking ownership can help emerging operators build a reputation and track record.
Seller Financing
Obtaining funding is always challenging and often requires multiple sources of capital to complete a deal. Panelists identified seller financing as an effective strategy for emerging operators, especially when pursuing underperforming facilities. Experience working at a facility, combined with a clear understanding of what is required to improve and sustain operations, can help build credibility and make a seller more comfortable.
From a macroeconomic perspective, there is no optimal window for entering the seniors housing market. Success is less about timing interest rates perfectly and more about capitalizing on the right opportunity. To learn more about identifying opportunities in seniors housing and care, contact Laca Wong-Hammond today.
The “Taking Command: Navigating Your First Deal” webcast is available for replay at McKnight’s.
faqs based on this article
Newer operators often look beyond transactions dominated by large institutional buyers and REITs. Opportunities can include smaller communities, family-owned businesses planning for succession, and underserved segments such as affordable seniors housing. Lument’s M&A team provides sell-side, corporate finance, and strategic advisory services to owners and operators of seniors housing and care, including those considering legacy planning or strategic alternatives. Learn more about Lument’s M&A services or talk to Lument’s M&A team to see how they can help support you.
Whether you’re a seller or a buyer, an M&A advisor can help you clarify your goals and options, understand valuation, and identify prospective counterparts. Lument’s M&A team guides a tailored transaction process from strategy formation and transaction structuring through sales execution and can also help with the capital placement of debt and equity. For a new operator with a limited track record, working with an advisor can help you evaluate opportunities and approach sellers with a clear plan. Explore Lument’s M&A services or read our latest Mergers & Acquisitions insights.
For an owner considering succession, a sale to a third party is one viable path. Alternatives include a sale to an insider, an employee stock ownership plan (ESOP), a sale-leaseback, a joint venture, a portfolio sale, corporate exit, or selective asset divestiture. Lument’s M&A team advises founders, operators, private equity, not-for-profit, and publicly traded companies. Specialized experience helps match the right structure to each owner’s goals. Talk to Lument’s M&A team about your options.
