Institutional interest has ramped up in the skilled nursing space, with investors seeing opportunity in “stroke-of-the-pen risk,” including but not limited to the influx of government dollars during the pandemic.
SNF real estate has experienced more liquidity compared to sister sectors like assisted living and senior housing, investors Ran Eliasaf and Jonathan Slusher told Skilled Nursing News, making it an attractive industry for investors that haven’t dabbled in the industry pre-pandemic.
Eliasaf is founder and managing partner of Manhattan-based real estate owner-operator Northwind Group. Slusher serves as head of senior living and health care for Northwind.
The firm has exposure in either equity or debt investments to about 37 skilled nursing properties, or more than 4,000 beds. Most are on the lending side, where Northwind provides “flexible and creative” financing solutions for portfolios of skilled nursing products.
Northwind in March 2019 announced its health care lending platform to provide mezzanine and bridge loans to seniors housing and SNF owners and operators with a goal of deploying $1 billion over the next few years.
More SNF-related transactions are in the pipeline, Eliasaf said.
This interview has been edited for length and clarity.
What transactional changes are you seeing in the skilled nursing space right now?
Jonathan: There’s always been a very large group of private investors in skilled nursing — what’s changing a bit is, there are more institutions considering allocating capital to skilled nursing.
During COVID, skilled nursing received a significant amount of federal dollars in support of operations while assisted living and other parts of senior housing really didn’t. The stroke-of-pen risk, you know, legislative change, is what investors get focused on when they’re comparing private papers; skilled nursing stroke-of-pen risk, meaning the federal government’s ability to send dollars and support operations, proved to be a very good thing.
Skilled nursing operators were able to maintain very good liquidity, work through issues and start to refocus and really keep the focus on the patient. Liquidity was very important during COVID.
So liquidity, so far, has made SNFs a better bet at this stage in the pandemic?
Jonathan: It’s something we’ve kind of been talking about for a while now and we’ve always skewed towards having comfort in skilled nursing because we believe it’s a fundamental utility of health care in the U.S. This was very much proven by the federal government and by states, when it was needed the most. Our thesis played out as we expected.
How have transactions gone for Northwind this year?
Ran: We’ve substantially increased our portfolio. Obviously the first year of COVID, like everybody we were more careful. In the last six months, I think we’re seeing increased activity; we’re transacting.
We did buy a property last year and by the end of this year we should finish the development of a 99-unit SNF in Ohio. It’s a brand new property we’re building and a joint venture with Carespring, who is the operator.
Jonathan: It was kind of the first time we had executed on some of that strategy. Now we have built a pretty significant track record of continuing to lend, build and acquire a mixture of different investments.
Do you expect that approach to continue in the next couple years?
Ran: I think a combination of where we’re heading is both providing flexible financing solutions where it makes sense and also teaming up with top tier regional operators. Since we can play in both the debt and the equity side, we can be very creative. We don’t have the limitations that (real estate investment trusts) REITs providing financing in the space have.
COVID shows that good operators that better manage their property and take good care of the residents really were able to plow through this — we’re trying to provide financing and bring capital to those operators.
Does that mean growth for Northwind too?
Ran: We’re going to grow substantially, both on providing debt solutions, and selective acquisitions. We always partner with the right type of operator.
Jonathan: It’s really a reflection of our track record for the past three years, focusing on identifying the best operators, creating mutually beneficial partnerships with them, and being a long-term investor in each of our transactions, whether we’re an owner or a lender.
We’re not focused on short-term returns; we’re focused on preservation of capital and in being good stewards of capital and partnering with the best operators — it’s the most important aspect of every transaction we do.
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