Case Studies

The Background: A Seasoned Operator Sees Potential  

Over the last two years the senior living and seniors housing industry has been pummeled throughout the pandemic. Workforce retention and dwindling occupancy, along with exorbitant costs for PPE (personal protective equipment) and added infection control measures created a perfect storm of profitability problems.

Now, owners and operators are faced with rising inflation costs and sustained staffing shortages. For those operating assisted living facilities, where Federal relief has been slow to gain traction, some are deciding to close the business altogether. For other owners and operators, these types of challenges also create opportunities in the marketplace—specifically, opportunistic and value-add acquisitions.

Opportunistic Acquisition: As the name implies, opportunistic acquisitions are marketplace opportunities that represent risk and challenges, but simultaneously have tremendous potential for the right operator and management team. These acquisitions are the most complicated projects and may not see a return on investment for a few years. To be successful, an experienced owner or operator must helm an opportunistic acquisition with a talented in-market management team to make the turnround possible. Opportunistic facilities often have little to no cash flow at acquisition and low occupancy, but present potential to produce a tremendous amount of cash flow once changes are made.

Value-Add Acquisition: A value-add involves a facility that may have poor occupancy and little cash flow at acquisition, but strong upside potential once the issues are addressed by the buyer (i.e., value-added to the facility or business model).

At Wilshire Finance Partners (Wilshire) we are in the business of financing opportunities. We focus on providing bridge loans and capital strategies to finance opportunistic acquisitions in the $1 million to $10 million range, specifically when an acquisition may not meet traditional lending requirements.

The Challenge: Regulatory Delays & Status Quo Staff

A seasoned operator in Northern California saw an opportunity to acquire two assisted living facilities that were struggling with senior-level mismanagement and regulatory ramifications. Not only were operational practices in question with citations for poor care, but unsurprisingly occupancy was floundering too.

With 30 years’ industry experience, this operator knew that with the right staffing members and the right plan, these facilities could thrive once again. For senior living and seniors housing providers, staffing challenges are nothing new, but in a poorly managed facility during the peak of the pandemic, the right staffing can prove even harder to come by.

The best leaders and operators know how integral staff are to the success of any seniors housing community and how those same individuals can make or break the quality of resident care. Even with thorough due diligence and strategic analysis, it can still be hard for experienced operators purchasing a facility to know which staff members are worth keeping and which individuals need to go. Opportunistic acquisitions where problems persist are akin to peeling back the layers of an onion. Once ownership officially changes hands, the immersion process begins to fully understand the most pressing issues and how to create operational alignment.

Aside from staffing challenges, and continued citations, the licensure process was taking longer than expected due to pandemic-related pressures on regulatory systems, creating delays and a backlog of paperwork.