Search

How to do it ... Borrow in a pandemic - Print News - McKnight's Long Term Care News

maknains.blogspot.com

Owner-operators will soon be confronting thorny financial questions as they emerge from the fog of the pandemic. How should skilled facilities prioritize spending? As one banker observed, the capital markets for skilled nursing may not have returned to where they were before COVID-19, but both debt and equity are available for operators who can prove their clinical expertise.

1. Get your fiscal house in order. Prioritize spending on fixes and enhancements.

The first step should be an accounting, or reconciliation, of all things financial, ranging from 2020 to early 2021, according to Jeff Binder, managing director of Illinois-based Senior Living Investment Brokerage. 

“These owner-operators were on the frontlines of the pandemic and so much was thrown at them that was unprecedented,” Binder said. “This included federal and state stimulus funding, which was obviously helpful but generally came with provisions and/or restrictions including potentially having to pay back some portion if not utilized appropriately.”

Infection control projects and private room conversions aside, it’s best to skip “cosmetics” and focus spending on anything that can pay off for cost efficiencies and/or improve the value proposition to the residents, said Imran Javaid, managing director at BMO Harris Bank. 

Javaid also advised undertaking work that would reduce operating costs like basic upgrades to HVAC and other elements related to aging facility infrastructure.

Javaid noted 2020’s other big crisis — natural disasters — and advised providers to upgrade back-up generators to ensure they can handle the expected increase in higher-need residents and the equipment they rely upon.

2. The pandemic forced nursing homes to triage. As the crisis winds down, recognize that physical facilities took nearly as much of a beating as staff and residents did.

As Binder and others say, lenders tend to look favorably on ongoing, safety-related structural projects.

“Given the rising costs, time to market, lack of developable land, and barriers to entry for new developments, spending money on existing projects makes a lot of sense,” said Justin LeBell, assistant vice president at Lument.

LeBell pointed to two debt-financing options — the FHA Lean program and USDA’s Community Facilities program — as viable types of fixed-rate, non-recourse, long-term financing.

3. Crunch the numbers. Once you assess must-have projects, go deeper.

It comes down to juggling one’s appetite for debt while remaining a viable long-term care business, many experts say.

Fortunately for most owner-operators, the lending environment is brisk.

Scott Thurman, chief credit officer for FHA Lending, Greystone, agrees. He advises borrowers to reduce loan payments and take advantage of long-term permanent financing options for things like converting recourse debt to non-recourse debt, financing renovations and repairs, “and buying out partners.”

Still, prudent owners and organizations are limiting borrowing to property-related costs, whether it’s for acquisitions, renovations or new equipment, said Bill Wilson, managing director at Lument.

“With proper capital planning, for example, borrowing to fund two to three years of capital expenditures, owners and organizations can free up significant cash flow for operational initiatives,” he said.

4. Ultimately, borrowed money is wasted if it doesn’t result in keeping beds filled and workers happy.

Curtis King, executive vice president at HJ Sims, said capital is available to help fund renovations that “deinstitutionalize” facilities — which prospective residents and their families will be demanding.

Workers, meanwhile, will be attracted to environments that allow them to provide quality care.

“Lenders are looking for organizations and communities that are going to thrive in the long-term,” King said. “Growth capital is available for organizations that are able to demonstrate the ability to take care of residents with complex care needs. Providers who succeed will continue to develop their clinical capabilities and take on higher acuity residents.”

To that end, he added, “lenders have and will continue to support providers who invest in their buildings to develop new clinical programming and services.”

Binder, meanwhile, believes COVID-19-influenced improvements such as enhanced ventilation systems and on-site mini medical clinics are marketing-worthy improvements that incoming residents and their families will deem worthwhile.

5. Sound financial planning also requires an ability to provide a narrative of what shapes borrowing needs.

“Especially the fourth quarter with COVID’s third wave, 2020 will be a headache to assess for the next three years,” said Wilson, who urged owner-operators to understand how COVID-19 significantly impacted census and income, “while the data and experience is fresh.” 

Lenders will focus on hemorrhaging census, as well as one-time windfalls, so “understanding your 2020 story will set you apart.”

Moreover, as Javaid advised, understand that lenders will be looking at new borrow-worthy metrics such as changes in infection control protocols and vaccination rates of staff and residents. 

Let's block ads! (Why?)



"do it" - Google News
May 01, 2021 at 11:40AM
https://ift.tt/3tm7EGR

How to do it ... Borrow in a pandemic - Print News - McKnight's Long Term Care News
"do it" - Google News
https://ift.tt/2zLpFrJ
https://ift.tt/3feNbO7

Bagikan Berita Ini

0 Response to "How to do it ... Borrow in a pandemic - Print News - McKnight's Long Term Care News"

Post a Comment

Powered by Blogger.