EXPERT OPINION: A Conversation with Ben Klein

June 28, 2011

In this "Expert Opinion" interview, Ben Klein, CEO and founder of Platinum Health, discusses distressed and underperforming seniors housing properties and what his company looks for in profitable turnaround properties.

Ben KleinWatch the video      Read the transcript

Over the past 10+ years, Ben Klein has purchased or leased 28 seniors housing facilities in five states. In early 2001, Ben formed Platinum Health Care, LLC, with the purpose of managing long term care facilities.

In December of 2002, Ben and a partner, David Porush, started MTS Consulting, LLC. MTS provides municipal sales tax consulting to Fortune 500 and large middle market companies. MTS currently has offices in Illinois and California.

In 2005 Ben formed Upstairs Solutions, a start up dedicated to bringing online training to the long term care market. Ben had searched for a quality online training product for his facilities and was not pleased with what he found so he built one from scratch and started marketing the product in 2006.

In 2008 Ben along with two partners started 3 Diamond Development. 3 Diamond’s purpose is to develop and build senior subsidized tax credit apartment buildings.

Ben is very active and on the board of directors for the Illinois Council of Long Term Care. In addition, Ben is a board member of Assurecare, a captive insurer for the long term care industry. He has served as Chairperson in different committees for Assurecare, including Finance Chair, Settlement Chair, and Investment Chair. Ben is also involved in several charities. 
 

Contact Information:
Ben Klein
Platinum Health Care, LLC
7444 Long Ave
Skokie, IL 60077
847-329-4100 x 1016
bklein@plthc.com

 

Watch the video of the interview: 
 


 

Read the interview transcript:

Steve Monroe:
Everyone knows I’ve been writing about a lot of turnaround situations, especially over the past three years with all the distressed and underperforming properties. And one company, Platinum Healthcare, they have almost made it a specialty on buying turnaround properties. Not always turnaround, but they do a very good job on buying underperforming assets, investing in them and making them work. And I’m here today with Ben Klein, who’s the CEO and founder of Platinum Health.

And in the past three years—I didn’t really even know this statistic until recently—you have grown from just eight facilities in two states to 28 facilities in five states. And, which is I think unbelievable, you own 25 of the 28 properties at a time when most people are leasing or managing and all that.

And I know you couldn’t have done all this without my friend Paresh Vipani, but what’s your success, how do you do this?

Ben Klein:
You hit the nail on the head. It is great staff. Great CFO, great operating staff. Great staff in the buildings and great line staff. We invest in the staff, try to retain the staff and they’ve been great. And they’ve been able to operate them and operate them better than when we buy them and we fix them up and they’ve really done a great job.

Steve Monroe:
But you do invest in mostly turnaround situations. Why is that?

Ben Klein:
Because turnarounds really have the most potential to build equity and upside and take a building that you buy for X and make it worth three times X.

And we have to put money into the buildings to make that happen and we invest in the physical structure, we invest in the staff, we have online training, we have our own online training company. And so we invest in training the staff and retaining the staff. And we do all those things, usually it all comes together.

Steve Monroe:
Especially in the last two years, financing has been difficult for almost every buyer. A lot of deals have been held up because a buyer couldn’t get financing. And that’s even for stabilized properties. So how are you getting debt financing for properties that are either not cash-flowing or really sub-optimally cash-flowing?

Ben Klein:
I think the banks—the proof’s in the pudding. The banks like the fact that we can operate and we really do—we have a track record to operate and fix those types of buildings. We put in our own equity so that they believe that we’re committed to, not just picking up the lease for a small amount of money, but we’ve got a lot of money committed and put a lot of our own capital into capital improvements. And we are committed to fixing it and we’ve had a track record. It’s the track record that does it.

Steve Monroe:
I was going to say, how important is that, having that track record of these turnarounds, has that been the key with lenders?  Because the proof’s in the pudding?

Ben Klein:
The last two, three years, yes. If we had tried to start doing these kinds of turnarounds in the last 50 years, I’m not sure we would have gotten [that]. Having the track record before this banking crisis certainly helped and the banks knew we had the track record to do it and they believed in the fact that we could turn them around and they know that we keep capital in the buildings, we put capital in the buildings and we keep capital for that rainy day and they know it.

Steve Monroe:
And when looking at these turnarounds, which ones do you see have the highest financial reward?  Is it the skilled nursing side or assisted living or not property-specific?

Ben Klein:
I don’t want to punt that, but it’s really both, it depends on the deal. It’s really very specific to what the deal is and kind of turnaround and what kind of upside. It’s just different.

Steve Monroe:
In looking at a turnaround, what’s the hardest thing for you to figure out whether you’re going to be able to turn it around when you’re looking at it as an acquisition?

Ben Klein:
In the skilled market, some of that’s the really older buildings. You’re trying to figure out if you can make some of those really old buildings, bring them into anything that would be current.  I think that’s the most difficult, the older buildings are really hard. As they get older, to figure out how to bring them into something current that you can sell today. That’s the hardest part.

Steve Monroe:
And how many do you look at compared to how many you buy?

Ben Klein:
Oh, a lot. There are a lot of deals that we don’t even—we pass on, we don’t even look at, we look at it and we decide to pass on. There are a lot of deals, but there are a lot of regurgitated deals.

Steve Monroe:
And then after you turn them around, where is that decision on, do you refinance?  Do you sell?  Because I think you’ve sold a couple properties you’ve turned around, but on the whole, you’re kind of keeping them.

Ben Klein:
Yes. We sold three buildings in two different transactions because someone came to us and offered us enough money that it wasn’t worth keeping. Everything’s for sale.  For the most part, we keep them. We’re not looking to sell, but we try to refinance some kind of longer-term, fixed rate environments so we don’t have to worry about interest rates. And just keep operating. And use that cash flow to buy more.

Steve Monroe:
And you just completed a pretty good-sized skilled nursing portfolio acquisition in Missouri.  Are you going to be looking at more portfolios of that size?  Or …?

Ben Klein:
I think we will be looking at them, but we don’t want to lose sight of the ones and twosies kind of acquisitions. I don’t want size to be the dictator. It’s really about the deal. The deal’s got to make sense. We don’t like to overpay. We want to make sure we’re going to get a good number so that we can put the money into the building and not have to worry about improving it and operating out of a mediocre building.

We’ll look at portfolios, but we’re not going to take our eyes off the good one-offs.

Steve Monroe:
And I’m just kind of curious, you may not know this number off the top of your head, but when you buy an underperforming, distressed property and you put money into it, is there any kind of relationship between the purchase price—let’s say you buy it for $5 million and you may think it’s going to be worth $10 or $15 million—do you put in another 30% of the purchase price, [50%], to really…?

Ben Klein:
Each deal is different. Each deal is totally different. All depends on what the deal is.

Steve Monroe:
And then I know you’ve also gotten into the Medicaid-assisted living waiver business. I think you’re in Ohio and Indiana?

Ben Klein:
And Illinois, yes.

Steve Monroe:
And Illinois, okay. And you’ve been converting hotels. Is that going to be a bigger part of your business going forward, do you think?

Ben Klein:
I think that converting hotels or buying purpose-built assisted living, we bought some of those, too, and just taking the waiver program where they might not have taken it before, but if you buy the real estate low enough, you can still afford to take the Medicaid patients. I certainly think that we’re going to be buying more or converting more of those.

Steve Monroe:
And are you hearing anything in those states—Indiana, Ohio and Illinois—about, with the budget problems, what that may do to the Medicaid waiver rate?

Ben Klein:
You know, for the most part, they still view the Medicaid waiver programs, or in Illinois, it’s called the SLIF program, as a cost-savings from the skilled. So the line item, it’s maybe a half a percent of the skilled budget. So that’s really not where they’re looking to save their money. If they’re going to cut, it’s probably going to be in the skilled market. Which a lot of states are talking about, it’s on the table in a lot of places. We all have to hope this economy picks up quickly.

Steve Monroe:
I’m not sure about that.

Ben Klein:
I’m not, either.

Steve Monroe:
And then, for the rest of 2011, you already bought, what is it?  Twelve properties this year, in the first quarter?

Ben Klein:
We bought 12 so far.

Steve Monroe:
Is that going to do it for the year or do you think you’re going to buy more?

Ben Klein:
Well, we got another one scheduled for May 1st already, so there’s definitely another one coming up. Whether we’ll do any more this year, depends on whether we find the deal. We certainly have the capital still to put into deals. But you got to wait for the right one. Don’t want to do deals just for deals’ sake.

Steve Monroe:
You’re still looking for the turnarounds.

Ben Klein:
We’re still looking for the turnarounds, yes.

Steve Monroe:
Maybe in a few years we’ll call you the Turnaround King.

Ben Klein:
Call my CFO the Turnaround King.

Steve Monroe:
Absolutely. All right, well, thanks for sitting here and talking about it.

Ben Klein:
Thanks for having me.

 

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