What we heard about industry trends 3,000 miles from home.

After spending three days at the American Seniors Housing Association meeting and the Stifel Nicolaus “2020 Seniors Housing & Healthcare Real Estate Conference, other than jet lag, there were a few takeaways.

First off, on a few panels stand-alone memory care communities came up, and not in a good way. Because they tend to be small, a few resident deaths can have an outsized impact, the former over-development has still left a bad taste, and stand-alone anything is viewed by many as too risky. Speakers believed cap rates were at least 100 basis points higher than for assisted living. 

One thing we did hear is that Silverado Living, which is all stand-alone memory and Alzheimer’s care, has significantly improved the operations of its remaining 19 communities, the ones not transferred to another operator. EBITDA at these 19 has increased by 15% in six months. It just shows what can happen when you focus on 19 properties and not 39. We like the focused factory approach.

As you know, private equity firms have driven up prices for many portfolios. But not all PE firms are created equal. There were several we spoke with who just do not agree with the high prices that are being paid in the market. One difference is that if you have a billion dollars you have to get out the door, you are a little less price sensitive than if it is $100 million.

At the Stifel conference, skilled nursing was talked about favorably, by both providers and REITs, as the bottom may be in the rearview mirror, and PDPM has worked well with probably no claw-backs from anyone making excessive profits. We were told by one well-informed friend that any changes to the rates, if any at all, will not be until 2021. That should be comforting news to investors, lenders and providers alike.