EXPERT OPINION: A Conversation with Ryan Saul - January 2010
January 12, 2010
In this "Expert Opinion" interview, Ryan Saul discusses the major reasons the not-for-profit providers they've represented have been selling over the past few years and whether the sellers are willing to provide financing in this capital environment.
Ryan Saul, Managing Director joined Senior Living Investment Brokerage, Inc. in January of 2000. Now Managing Director, Ryan has sold over 120 Long-Term Care and Seniors Housing facilities and has over $520,000,000 in transactional experience across 20 states in his tenure at Senior Living. Mr. Saul has earned Top Listing and Top Selling Agent numerous times throughout his career and been honored with the President’s Club Award. Prior to joining Senior Living, Mr. Saul was a recruitment and business development officer for DuPage County Convalescent Center. He earned a BA in Business Administration and Finance from the University of St. Francis.
Ryan M. Saul
Senior Living Investment Brokerage, Inc.
490 Pennsylvania Ave.
Glen Ellyn, IL 60137
Watch the video of the interview:
Read the interview transcript:
I’m here today with Ryan Saul. He’s a managing director of Senior Living Investment Brokerage, one of the independent brokerage companies specializing in seniors housing and care. Ryan, you’ve represented a lot of not-for-profit providers who have been selling over the past year or two. What’s the major reason they are selling?
Well, we’ve been very fortunate. We’ve represented close to 15 non-profit organizations over the last three years. There’s two primary reasons why they’re selling. First to divest non-core assets. And the second is to free up their balance sheet and get properties off their books. But mainly it comes down to focusing on the mission, their core assets and geographically attractive properties.
Are not-for-profit sellers more or less willing to provide seller financing in this capital market environment?
That’s a real good question. And we have experienced in the last 15 transactions none of them included seller financing, which is surprising. But we found that when they make the decision to sell, it’s they’re getting them off their books. They don’t want to be involved. They’ve made the decision. And even if it would help get the transaction along, they’d rather take a reduction in price just to get the properties off their books.
Okay. And we know that not-for-profit providers tend to be a little bit top-heavy, sometimes a lot top heavy on the staffing side of things. How hard is it for you to figure out exactly how a for-profit buyer, operator will change the staffing when you’re marketing? And do you pass this information along to your seller/client?
Labor is the key component on where non-profit expenses run high. Another area is benefits. So, those are the two areas as it relates to employees. It’s difficult since every non-profit operator and for-profit operator runs different. Everybody has different staffing models, so no property runs the same with a for-profit entity. So, what we try to do is gather as much data as we can from industry periodicals and just industry standards. We don’t apply those. We let the for-profit buyers apply those. And then, we do present them to the non-profit clients so that they can make a decision on is this operator going to run our property correctly and it’s up to our standards.
Well, what’s the most important thing for your not-for-profit clients when you’re selling them? Is it the selling price? Or is it who the buyer is?
For not-for-profit clients, it isn’t the sales price. It definitely is that it is a good fit for the community with a similar mission and vision for the property.
So, have any of your clients, for argument’s sake, taken an offer that’s 10 percent less than the highest offer because they liked the buyer better?
Absolutely. And it blows me away every time it happens. But they feel like they have a duty to those staff and residents. We’ve had groups select a second and third highest offers and choose those just because they were a better fit for the organization.
And do the not-for-profit sellers tend to keep the upcoming sale confidential from their staff at the local facility level, much like the for-profit guys do?
That’s a good question. I would say at our proposal level, when we’re exploring the pricing and the sales process it’s kept confidential. But once a buyer submits a letter of intent, a number of key personnel at the facility level are brought into the mix. And then, when due diligence period starts, it’s amazing to me that the not-for-profits do bring in their staff and residents much earlier in the process than for-profits. They think that it’s an obligation they have. And then, also it helps them better with the public relations.
Now, we’ve been hearing through the grapevine a lot that there’s a lot of CCRCs that may be coming onto the market primarily because they’re having trouble filling up with residents, because of the housing market crisis. Are you hearing the same thing? And these are mostly on the entrance-fee CCRCs. Are you hearing the same thing? And what is Senior Living Investment Brokerage doing to gear up for that?
We are hearing the same thing, and we’ve experienced a significant uptick in proposals for entry-fee CCRCs. Two major problems with those communities are they are extremely high leveraged with significant amount of debt. And in the current environment with an underperforming asset, we typically can’t even get to the debt level on evaluation. The second thing is they have the entry fees, which provides financing, to be difficult. They’re a liability on the books as far as the entry fee goes. So, we’ve really found that in the last dozen proposals we’ve gotten we can't even get close to the debt level on these assets.
So, we find that it’s going to come to a point that it’s going to get taken back by the bond holders or by the lender. And that’s I think when we’ll be in a position. So, what we’ve been doing at Senior Living is we’ve been making a concerted effort to get in touch with all those lenders and the bond holders to develop those relationships. And also, in our target market, we’re making sure that we’re in constant contact with all of those not-for-profit CCRCs.
And are any of your not-for-profit clients buyers in the market today?
They are not buyers. I’d say across the country they’re all looking, but none are in a position to purchase mainly because the bond market is non-existent right now. And that’s what a lot of them used for their financing. And secondly, they’re focusing on their core assets and getting their house cleaned up as far as their balance sheet goes and their current operations. And they’re more divesting.
Okay. Very good. Well, thank you very much for spending time with us today. And good luck in 2010.
Thank you very much.