Assured Senior Living was ready to grow.
If only they could find a bank ready to grow with them.
The year was 2018, and the Wheat Ridge, Colorado-based provider of assisted living and memory care services needed a lending partner to help them expand in the residential AL market. The model of 8-16 residents per community, with communities clustered together, was one that banks didn’t understand.
“We went to about 50 banks,” says Assured CEO and founder Francis LeGasse Jr. “They didn’t get our model. They weren’t sure about senior living as an investment strategy. They would say, ‘We are really concerned about if you defaulted.’ It was one of the more stressful endeavors.”
Finally in early 2020, Assured found a lender that didn’t need the model explained to them.
BOK Financial.
“They were the first bank that actually understood how to look at and value and underwrite how we did our communities and homes,” LeGasse says. “We didn’t have to educate them on how senior living worked, such as the payer sources. They understood the space and the need in the space. Better than any other bank, they forecasted the need for this model over the next five or ten years. And they were really professional at putting a good strategy together on how we can attack this.”
When Assured took its first meeting with BOK Financial, they had just one such community. Now they have 32, and their revenue has multiplied 4x.
Unlocking small-care lending through creativity: why nontraditional models require nontraditional financing
What Assured found in BOK Financial was a lender that understood senior living broadly, understood their small-care residential model more specifically and held a willingness to be proactive and creative in helping Assured fund their communities. Assured did not own its lone residential property at the time, and instead had a lease-purchase option with their landlord.
They came to BOK Financial looking for financing to fund the acquisition of the real estate of the homes that they were already operating.
“That asset class has historically been challenging for traditional banks to finance because it looks very different on the real estate side from a traditional skilled nursing or assisted living building that might have anywhere from 50 to 100 beds,” says Jessica Johnson, Executive Director, Healthcare Banking at BOK Financial. “Many lenders view that as higher risk because of the smaller scale. They tend to be more volatile because the loss of one, two or three residents can dramatically change the financial performance of that building because it is so small.”
LeGasse and the team at Assured did not have a lot of equity, meaning BOK Financial had to get as close to 100% of cost as they could so that they wouldn’t have to find outside investors to “fill that equity gap,” Johnson says.
This is where BOK Financial’s combination of industry knowledge and creativity comes into play. Because what Assured lacked in capital, they made up for in experience and success.
“They had been in those buildings for several years already and had a lot of success in turning them to the level of profitability where the cashflow was able to support the debt request,” Johnson says.
BOK Financial also recognized the value of the diversification of Assured’s portfolio. They were leasing and operating 10 buildings at the time, which as a pool could mitigate some of the portfolio risk. Another benefit: Assured had expertise in traumatic brain injury (TBI), which the state of Colorado covers under Medicaid.
From BOK Financial’s perspective, Assured’s success in negotiating those TBI contracts with the state, and then finding and treating those patients, was a real selling point.
Lastly, BOK Financial was able to get creative with the real estate challenge.
“Rather than getting separate real estate appraisals for each individual building, we were able to get comfortable with what’s called a ‘scattered site appraisal,’ where we appraise all of the buildings together as if they were one asset,” Johnson says.
An important lesson: scalability is possible, but not automatic
As a result of all of these strategies, BOK Financial successfully funded 90% of the cost, leaving Assured with a very low dollar amount that they needed to bring to the table in cash. This allowed Assured to make the deal without needing outside investors, and without diluting their stake. BOK Financial delivered a three-year bridge-to-HUD loan, which they were able to replicate on another loan, moving from a $16 million loan to $32 million.
BOK Financial and Assured are now working on another similar loan. In short, BOK Financial’s creativity, flexibility and industry expertise has helped Assured go from owning one asset to owning 32, the majority of which are now being financed with long-term non-recourse financing. Crucially, Assured can now leverage their portfolio for new projects.
“We’ve given them a platform to continue to grow their company without bringing outside investors in,” Johnson says.
Today, Assured is not only looking for more in-state acquisitions, but they’re exploring moves outside of Colorado. No matter where they go, BOK Financial will be with them.
“They’ve been instrumental,” LeGasse says. “You and I would not be talking today if it wasn’t for BOK Financial. Pretty simple. We would not have had the growth we had without BOK taking the chance on us in 2020.”
This Views article is sponsored by BOK Financial. To learn more, visit them at bokfinancial.com/seniorhousing.
