EXPERT OPINION: A Conversation with Laca Wong-Hammond

December 10, 2012

In this "Expert Opinion" interview, Laca Wong-Hammond, Head of Health Care Real Estate, Healthcare Investment Banking, Raymond James Morgan Keegan, discusses CCRCs, SNFs, independent living, home health, nursing facilities, investment banking and more.......

Watch the video      Read the transcript

Ms. Wong-Hammond leads the firm’s healthcare real estate investment banking activities, including acquisition and divestiture of assets and portfolios, sale/leasebacks, and corporate and project-level strategic and capital advisory, including debt and equity capital placements throughout the continuum of healthcare properties. Her clients include hospitals, healthcare systems and providers, developers, private equity organizations, and publicly-traded companies.

Prior to joining Raymond James | Morgan Keegan in 2012, Ms. Wong-Hammond spent six years at Shattuck Hammond Partners, the healthcare investment banking boutique acquired by Morgan Keegan in 2007. She also worked for JP Morgan's real estate and lodging investment banking group in New York, in the capital markets group at iStar Financial, Inc., a publicly-traded REIT, and in the internal corporate finance group at Merrill Lynch.

Ms. Wong-Hammond received a B.S. with Honors from Cornell University and completed the General Course at the London School of Economics. She currently serves as a member of the Board of Trustees at Chen Dance Center, a not-for-profit performing arts school and theatre in lower Manhattan. She is also the Co-Chair of the 2013 Building Owners and Managers Association (BOMA) Medical Office Buildings and Healthcare Facilities Committee, and is a 2012 Woman of Influence as selected by Real Estate Forum.

 

Contact Information:
Laca Wong-Hammond
Head of Healthcare Real Estate
Healthcare Investment Banking
Raymond James | Morgan Keegan
630 Fifth Avenue, Suite 2950
New York, NY 10111
212.314.0406
laca.wonghammond@morgankeegan.com

 
Watch the video of the interview: 
 

 

Read the interview transcript:

Steve Monroe
We all know there have been a lot of mergers and acquisitions in the senior housing and care side, and there were also mergers and acquisitions among the investment banks. Early in 2012, Raymond James closed on the purchase of Morgan Keegan, two well-known investment banks. I have here with me today Laca Wong-Hammond. She's the head of health care real estate for what is now Raymond James Morgan Keegan. It’s great to have you here.

Laca Wong-Hammond
Thank you, Steve.

Steve Monroe
Raymond James Morgan Keegan seems to be getting more active on the banking side in senior housing and care in the last few years. Are you doing more on the financing side or more on the M&A side right now?

Laca Wong-Hammond
The best way to classify that is really our post-acute care coverage spans across a continuum of sectors, so that includes IL, ALF, CCRCs, SNFs, home health, hospice, all the way to LTACH. Where the market is now, we actually cover both sides of it. We have several transactions in the M&A arena, including we closed the sale of the operating company of PennMed Consultants out in PA, which comprises of 18 nursing homes. In real estate, we created a forward purchase on that, a forward delivery on the real estate. We also have in process two nursing homes that are locked up in a separate sale. There is a third one that's being marketed as we speak, as well as a CCRC in the Southwest. We're also selling a home health agency.

So that's the merger & acquisition front. On the financing side, we closed on a couple of debt placements, a debt restructuring, and we also have a construction financing in process as well.

Steve Monroe
So on the M&A side, it sounds like you're currently doing more in skilled nursing. Does that happen to be what you've worked on, or are you split between skilled nursing and the senior housing side?

Laca Wong-Hammond
It's a fair amount of balance. I think sellers are motivated to sell their need-based assets, so that mainly is more the higher acuity types, so skilled nursing actually falls in that arena. But also assisted living and memory care type facilities or the continuum, which is a CCRC that we have in play right now.

I think some of the other trends that are driving sellers to monetize are that a large part of our business is with non-profit clients, so health systems are realigning their care services, sometimes to acquire post-acute care operations and other times to maybe shed some of those from a real estate standpoint. So we are having some of those assignments in discussion. And at the facility level, some operators may want to diversify their revenue, so they're looking to restructure their facilities from just a care perspective to build on their services.

Steve Monroe
On the M&A side, are you finding there is more buying interest in the need-driven type facilities?

Laca Wong-Hammond
That's kind of a two-pronged answer. Yes and no. Yes, needs driven just because the economy, the way it is now, independent living has fallen a bit out of favor, especially the high-end entry fee CCRCs. People have a little bit of trouble monetizing on their own residential real estate before moving in. So needs-driven assets have gained investor interest. However, when you get to really needs-driven, like the skilled nursing side, they've been hit hardest by the CMS cut. So for the senior living aspect of it, they've been buffered more because they have that balance of the private pay.

However, because cost mitigation has proven itself over now several quarters, the effects of the CMS cut have been mitigated. So, we're seeing more investor interest on the SNF side. Additionally, I'd like to say that the Sun Healthcare transaction and LaVie really priced out what OpCo valuations are, I think we will probably be seeing more of those because it provided much needed clarity to the industry in terms of OpCo valuations. So who knows? Maybe some of the operators that are running some portfolios may want to take some chips off the table.

Steve Monroe
You mentioned not-for-profit health systems are kind of restructuring what their services are. On the financing side, are you doing a lot of financing on the not-for-profit side, or is it kind of split with not-for-profit and for-profit?

Laca Wong-Hammond
It is split. So that's the response to that. On how we assist not-for-profits on the financing side is typically through tax-exempt underwriting. Raymond James Morgan Keegan has one of the top municipal underwriting desks on the Street, so we're quite proud of that, so we're very prolific in that arena. And then we're also able to privately place capital for them as well. Some of these tax-exempt organizations are looking to use taxable debt to fund, just because there are fewer covenants that allow them to more freely manage their facilities. The way the interest rate environment is going, taxable debt can in some instances be as attractive as tax exempt.

Steve Monroe
Especially on the HUD side.

Laca Wong-Hammond
Right.

Steve Monroe
Can you give me an example of interesting financing that Raymond James Morgan Keegan has completed?

Laca Wong-Hammond
Sure. Actually, one that I can cite marries both our expertise in serving a corporate client or for-profit client as well as a not-for-profit, which is a transaction that we closed in May of this year. Our client is a private owner-developer called Hempstead Realty, they won an RFP that was put out by Nassau Health Care Medical Center, now called NuHealth System. In 2006, the Berger Commission mandated the downsizing of a nursing home that was really large, owned by NuHealth, 589 beds down to 320 beds. We want to move these beds into a lower acuity setting.

So our client, Hempstead Realty, won that RFP and they had the right to take those patients and help move them to a new facility. So in doing so, NuHealth was going to continue to operate this additional facility, but they would not own. They came to us, requested $32 million of debt on the construction side, and hopefully on the mini-perm side as well.

We had some headwinds because some of the lenders we went to said well, I want some covenants that involve the not-for-profit operator. So that's where our expertise with serving not-for-profit clients I think really kicked in because we wanted to make sure Hempstead Realty's relationship with NuHealth was maintained throughout this process and we negotiated in a way where that relationship faced the minimal amount of disruptions.

So in the end, we were able to price the financing at a very favorable rate, ten-year term, construction to mini-perm. And the relationship was maintained between the not-for-profit and for-profit client.

Steve Monroe
That's good. How long did that whole process take?

Laca Wong-Hammond
It took about half a year.

Steve Monroe
Do you find on the M&A side to get a deal done, do you ever say well, we can put together the financing for the buyer? Does that happen?

Laca Wong-Hammond
Sure. If that's requested by either a client—the seller, typically—or a buyer, then absolutely we would go ahead with that. Actually, we do have very deep bed-placement capabilities because Raymond James Morgan Keegan is not just a private placement group, but within that they have a distressed debt group, they have a mezzanine debt group and of course first mortgage placement bankers. But also a public markets, fixed income capital markets group as well. So we can help with financing on a variety of fronts.

Steve Monroe
Do you also do agency financing, Fannie, Freddie, HUD? Do you have an arm that does all that?

Laca Wong-Hammond
That's a great question. We're not an FHA lender. We do help negotiate on FHA loans. So actually an area that we are very prolific in is the USDA community facility and guaranteed loan program. We've seen a lot of success in that arena. Raymond James Morgan Keegan actually has a small corporate bank, total $8 billion in assets, it's really used for corporate relationships. So I would consider us an on-balance sheet lender as well, so that's why I think we haven't decided to apply to become an FHA lender because we don't want to use our own monies for the bridge to HUD instance.

Steve Monroe
Well, it sounds like the merger of the two companies is going okay—

Laca Wong-Hammond
Yes, absolutely.

Steve Monroe
And been busy. Good luck for 2013.

Laca Wong-Hammond
Great. Thank you.
 


 

 

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