EXPERT OPINION: A Conversation with Ken Assiran

February 29, 2012

In this “Expert Opinion” interview, Ken Assiran, Managing Principal of Capital Health Group, discusses what makes an assisted living facility successful, acquisitions, seniors housing management, and more.

Ken Assiran, Capital Health GroupWatch the video      Read the transcript

Kenneth Assiran was a founding partner and Managing Principal of the Capital Health Group, LLC (“CHG”) and is responsible for all management at CHG. Mr. Assiran originated the portfolio and manages the acquisition process and directs the asset management functions at CHG. Lines of credit and lending relationships are developed and managed by Mr. Assiran.

Capital Health Group, LLC is a privately held owner operator of senior housing facilities throughout the United States. As of February 2012, Capital Health Group owned an interest in 16 facilities consisting of over 1,200 beds. This portfolio is located across ten states nationally and includes independent living, assisted living, and memory care facilities. The Company was founded in October 2006 and is headquartered in Media, Pennsylvania. Capital Health Group is lead by founding members Kenneth R. Assiran and John W. Dwyer, and senior management team has over 100 years of combined experience in the senior housing and real estate industries.

 

Contact Information:
Ken Assiran
Capital Health Group, LLC.                              
Media, Pennsylvania                      
610-565-7820                                 
kassiran@caphealthgroup.com

 

Watch the video of the interview: 

 

 

Read the interview transcript:

Steve Monroe:
A lot of people are out looking for acquisitions these days, and one of them for the last several years is Ken Assiran.  He’s the Managing Principal of Capital Health Group.  Tell me a little bit about Capital Health; when you got started and when you did your first acquisition.

Ken Assiran:
Sure.  We started the company in October of 2006.  Of course, I had been in the industry for a long time.  We did our first acquisition in April of 2007. 

Steve Monroe:
So how many properties do you guys now own?

Ken Assiran:
We now own 15 properties.  Over the past year, we’ve divested four properties.  So we had 19 properties, and now we own 15.

Steve Monroe:
And you manage all 15 of those?

Ken Assiran:
No, we don’t.  We started a management company in 2011, and we manage five properties now.  And we’ll continue; all our new acquisitions we will manage.

Steve Monroe:
Do you have any agreement with the other managers to at some time take over the management after a certain contract expires, or that’s something you don’t want to do?

Ken Assiran:
Well, we respect all the contracts we have with our existing managers, and as long as they’re doing a good job, which I expect they will, we’ll keep them in place.

Steve Monroe:
And what’s your breakdown between assisted living and skilled nursing?

Ken Assiran:
We actually don’t own any skilled nursing.  We manage one building that’s half skilled nursing and half assisted living in California.

Steve Monroe:
And then your acquisitions, have they been mostly on the distressed side, semi-distressed, or turnaround, or just because it makes sense?

Ken Assiran:
I would say most of our acquisitions, if not all of them, have been value added plays.  Some of them have been distressed assets.  We’ve bought distressed debt, and then basically foreclosed on the real estate and now own the real estate.  We’ve bought buildings that have been under-performing and improved their performance.  We’ve bought buildings that are in great shape, where we wanted to increase the capacity or the size of the buildings by adding additions.  And we’ve built new.  So we do a lot of things.  We like to do distressed deals.  There are only so many that work, and that we’re interested in, but we’ve done quite a few.  We’ll continue to work in the distressed area, but that’s only part of the programmatic approach that we take to acquisitions. 

Steve Monroe:
And in the turnaround/distressed area, one, how long does it usually take you to bring them up to the level where you’re happy?  And then what’s the hardest part, do you find, about turning them around?

Ken Assiran:
They’re all different and they all have different issues, but I would say in general it takes about two years to turn a building around.  Buildings, when you buy distressed assets, there’s a certain stigma that comes along with the asset with general problems, and I think you have to change the image of the properties.  I’d say it takes a couple of years to do that, to fully stabilize the asset and get beyond the stigma that you buy it with.

Steve Monroe:
Is the exterior image the hardest thing to change, or the interior culture?

Ken Assiran:
I think it’s the culture of the building, and the issues that created the distress.  You have to first fix those, and then you have to work on a new image in the community.

Steve Monroe:
Right.  And how do you typically finance your acquisitions and development?

Ken Assiran:
Traditionally, we’ve used our own equity plus different partners that we’ve worked with at different times through our growth cycle.  However, just recently we’ve entered into a long term joint venture with Hunt Realty Investors, and that will be a long term programmatic equity investor that we’ll work with in building a large portfolio.

Steve Monroe:
And I assume if you had that equity lined up, that’s great.  Congratulations.  I assume that that will make the debt side that much easier?

Ken Assiran:
I think it will help on the debt side because with this programmatic equity, we’re going to decrease the amount of leverage that we receive from lenders.  We’re also looking at going into a programmatic approach with one or more lenders, so we won’t be basically searching the market for debt, we’ll have lines of credit.  We have had lines of credit in the past, and I think we’re pursuing that right now.

Steve Monroe:
How do you find your acquisitions?

Ken Assiran:
Well, the four partners that have been in the business have all been in it for 20 years or more, and so we have really strong relationships that we’ve built through our careers.  We know a lot of banks, brokers, operators, generally people in the industry, so a lot of it is due to relationships.  Other approaches are, we see the deals that come out through the brokers, whether they’re debt brokers or property brokers.  So we’re very active.  We see what’s going on in the industry, and if we see something we like, we respond.  Our record of closing what we basically decide to buy has been very high.

Steve Monroe:
Okay, that’s good.  You’ve been in this industry for quite a while.  How have the properties that you’re seeing today changed from three years ago?

Ken Assiran:
I think more people have been chasing fewer properties.

Steve Monroe:
Today?

Ken Assiran:
Today.  I think there are fewer distressed properties; there are more people that want to buy distressed properties.  There are more buyers in general.  The REITs have certainly changed the paradigm of value.  I think values have gone up.

Steve Monroe:
For the big portfolios.

Ken Assiran:
For the big portfolios, and also for the quality properties, I think even for the smaller portfolios.  I think for assisted living and memory care, I think values have gone up for quality properties.

Steve Monroe:
But you were really looking at the onesie-twosie type properties, and the REITs aren’t going to compete with you on that because they’re looking for much bigger transactions, I would assume.  You not going for the big stuff.

Ken Assiran:
Right, we haven’t.  We don’t really compete with the REITs in the acquisitions that we do.  We’re really looking for properties where we can create value, and it appears to me that the REITs are really looking to buy stabilized income streams.  What we want to do is buy properties that aren’t stabilized, that there’s value added opportunities, whether they be through renovations or adding additions or doing whatever the challenge is with the property.  And then we take these properties, we stabilize them, and then one of our exit strategies is to sell them to REITs.

Steve Monroe:
So that is going to be one of the plans down the road.

Ken Assiran:
Yes.  And the portfolio that we’ve developed, we’re getting it ready for sale in 2012.

Steve Monroe:
Really?  But you’re going to then go on and expand further with a new relationship with Hunt?

Ken Assiran:
Yes, we’re going to continue to build a new portfolio with the joint venture with Hunt Realty Investors, and really build a larger portfolio.  And ultimately, we’ll keep that, and when we get enough mass we’ll probably sell that as well.

Steve Monroe:
Would you have a target number, let’s say 2012, one, how many acquisitions you’d like to do?  And the second part of the question, with Hunt, do you have a certain size that you want to get to with them?

Ken Assiran:
We probably want to do anywhere from five to 10 acquisitions a year, depending upon the size, and we want to build a portfolio that’s larger, north of 20 properties.  I don’t know what the right number is.  We’re somewhat a creature of the market.  If an opportunity presents itself to sell the portfolio, once we get enough critical mass we would probably sell it if market conditions are favorable.  If they’re not favorable, we’d probably hold onto it and increase the mass further, and then sell the portfolio.

Steve Monroe:
Okay.  Well, good luck next year, and good luck with your new equity partner.  It sounds like you’ve got the platform ready for growth.

Ken Assiran:
Well, thank you.  I think we’re ready, and we’re out in the marketplace looking for new product.

Steve Monroe:
I’ll let people know that.

Ken Assiran:
Thank you.

Steve Monroe:
All right, thanks.

 

 
 

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