Despite recent challenges, many private equity firms continue to view seniors housing as a good long-term investment, according to panelists Thursday at a webinar hosted by Argentum.
“No one can deny that healthcare and seniors housing in particular is the place to be long-term,” said Frederico Lacour, managing director of international investment firm Fosun Property Holdings, “We are short-term skeptics, long-term believers in this sector.”
For some private equity firms, the pandemic actually has been a positive when it comes to deal negotiations. In July, for example, Austin, TX-based Kong Capital announced its acquisition, with MedCore Partners, of a seven-property senior living portfolio from Ventas. Kong and MedCore were able to negotiate the price of the portfolio down to $52 million from the initial $70 million purchase price due to the effects of COVID-19.
Although the transaction appeared to be “on life support” several times between January and July, Kong stuck with the deal because the firm is confident in the needs-based nature of seniors housing, said Kate Ford, a principal at Kong Capital.
“We view it as such a niche environment, with a lot of operational complexities,” Ford told attendees. “Plus, we like that there aren’t as many players here as some of the other real estate sectors.”
To attract private investors, however, senior living operators have to wear two hats: a mission-focused hat and a business-focused hat, said Carl Mittendorf, chairman and CEO of Colonial Oaks Senior Living.
“Smart operators focus on the mission but also play the business game well,” Mittendorf said. By avoiding food waste, staffing appropriately and keeping good financial records, operators can demonstrate to potential firms that they are a good investment.