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ALFA hosted 150 executives committed to advancing excellence in senior living at the ALFA 2013 Senior Living Leadership Forum, October 16-17 in Las Vegas. For two days, plus a half day of pre-conference events, senior living executives sought solutions to the biggest challenges in facing the fast-growing senior living business, forged new relationships, and left with plenty of solutions to put to work back home.

“The annual Executive Forum is where c-level senior living leaders and executives among ALFA’s industry partners gather together for deep solutions-focused discussions,” says ALFA President/CEO Rick Grimes. “The Forum’s highly interactive sessions give everyone the opportunity to participate, to share their own strategies and learn from others’.”

Here is one in an occasional series of articles from the leadership forum.

Deep Dive Session Summary: Financial Market Conditions

Facilitator: Tom Croal, Chief Financial Officer, Silverado

Tom Croal, Chief Financial Office of Silverado and Chair of ALFA’s CFO Executive Roundtable, led one of several deep dive discussion at the 2013 Senior Living Executive Forum.

A few years ago, senior living communities saw scarce access to funding for capital improvements and expansion. The industry was overbuilt, census was stagnant, and belts were tightened. Today, senior living CFOs are enjoying a much better environment.

Thanks to market demand and proven real estate fundamentals, there’s renewed bank interest and an abundance of capital available for senior living companies and developers. Private REITs, in fact, raised $16-18 billion over the past 6 to 8 months, according to discussion participants.

In a deep dive discussion on financial market conditions, Forum participants made a number of observations regarding the current financial environment for senior living. For example, significant development is occurring, thanks in part to lower capital rates. Nearly every participant in the room was able to report buildings in the ground or in the works. The number of assisted living units under construction in the 100 top metro areas is up 47 percent over 2012, according to new data from the National Investment Center for the Seniors Housing & Care Industry (NIC).

Providers continue to see significant demand for additional properties and regional banks are forking over cash to help, offering 65 to 75 percent financing, participants shared. REITs continue to play the mezzanine financing role, according to participants.

The discussion also included some conversation around budgeting for capital expansion. Particularly as properties age and needs for technological advances increase, capital expansion budgets are swelling. “It’s important to budget some capex for upgrading to remain competitive,” a participant said.

What’s clear today is the investment community now sees senior living as a safe investment. “For investment groups, it used to be that the care component was a stumbling block. But they are starting to get it now.

The looming risk, of course, is overbuilding, but participants feel secure about anticipated census in their newest properties. The more the nation moves to nationalized health care, the better senior living is going to look,” a participant pointed out.

ALFA members may log in to download the Senior Living Executive Forum Summary at www.alfa.org/2013ForumSummary.

 

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