PulsePoints

Cambridge Chairman Jeffrey A. Davis will participate in a panel discussion on healthcare finance during the annual HCap (Healthcare Capital) Conference scheduled December 7-9 at the JW Marriott Hotel in Washington, D. C.

In the session five panelists are slated to discuss Healthcare Finance 202: A CEO Primer. Joining Mr. Davis on the Dec. 8 panel will be Tim Ashe, Frazzi Associates; David Allen, NXT Capital; Greg Pachus, Silicon Valley Bank; and Mark O’Brien, Gemino Healthcare Finance.

HCap is a national venue for healthcare providers and capital to meet, do business and learn about policy and entrepreneurial trends. Conference participants gain insights from policy insiders and visionaries on big picture trends affecting the entire healthcare system.

“The conference provides an opportunity for conference participants to meet leading players and strengthen access to capital. Participants network with CEOs and CFOs from other healthcare provider segments.” Mr. Davis said.

Keynote speaker for the HCap Conference will be Congressman Paul Ryan (R-WI), Chairman of the House Budget Committee. Rep. Ryan will discuss the controversial “premium support plan” he believes will transform Medicare into a more economically sustainable model.

It’s almost pretzel time!

Cambridge Chairman Jeffrey A. Davis says the company’s executive staff is looking forward to participating in meetings with industry clients during the 21^st Annual NIC Conference set September 21 through 23 at the Marriott Wardman Park conference hotel in Washington, D.C.

“NIC is the senior housing/healthcare industry’s top deal making event. Every year the event brings together the industry’s leading investors, owners and operators to share candid insights about opportunities that lie ahead,” he said.

Cambridge has participated in all but one of the 21 NIC conferences held since 1990. The company will again be an educational sponsor at this year’s event, he noted.

According to conference planners, NIC is committed to facilitating networking. With transactions and capital flows increasing, and compelling industry performance data readily available, interest in the senior housing/care sector is on the rise.

Mr. Davis said the Cambridge staff will share ideas on how to maximize funding opportunities in the current market. Those wishing to schedule a meeting with company executives during the industry‘s premiere conference should contact Zachary Scardina at 312/521-7625.

Just as you know that the sun rises and sets every day, you also know that nothing ever stays the same in Washington, DC.  It seems like every minute of every hour of every day, something new is happening.  Thankfully, the Committee on Healthcare Financing has remained a strong and collaborative voice with the FHA/HUD on behalf of HUD 232/242 lenders, borrowers, and, most importantly, community residents.

Cambridge has been a member of the Committee for many years, and has worked with it on numerous, significant issues which impact and affect HUD 232 lending and the delivery of the program’s benefits to all participants in the senior living and long-term care community.

As in the past, the agenda for this year’s annual meeting was full, packed with a variety of speakers and concepts.  It began with the welcome speech from Phil DelVecchio, the Chairman to the Committee, followed by an update from Rod Owens, Counsel to the Committee.  We then received updates on the current overall mood of Washington from Scott Reed of Chesapeake Enterprises, and a Washington update relating directly to HUD from Scott Keller of National Strategies Group.  They were both terrific speakers!

The annual meeting then continued with terrific presentations on healthcare reform from a variety of representatives from different organizations, including the Coalition for Seniors Health Care Reform; the American Health Care Association; the American Hospital Association; the American Senior Housing Association, and the Greater New York Hospital Association.  Next, senior HUD representatives delivered a two-part presentation, led by the Deputy Assistant Secretary, Roger Miller.  Roger, continued congratulations for your tireless efforts in support of the HUD programs impacting seniors.

Then it was time for a terrific lunch, where a surprise award was given to Michael Mazer of Krooth & Altman, former Counsel to the Committee and defacto Executive Director and now retired.  This award is given annually to the representative best impacting the Committee’s results.  We can’t say enough “Thank You’s” to Mike and the tireless work he did championing the Committee on Healthcare Financing for many, many years.  We can’t even count the number of issues that were resolved due to the Committee’s overall impact and support.  Everybody in the audience realizes that we would not be doing business the way we are today without Mike’s tireless leadership.

Mike, you certainly deserve this award, and we’ll definitely miss you.

After-lunch presentations and speakers included Robert Ryan, the FHA Commissioner; a presentation on financial markets and health care credits, and a discussion, always interesting, on the appropriation challenges impacting our world.  You’re probably tired just reading the agenda; for those of us in attendance, it was a complete and full day.

What did I learn?

It’s amazing to realize how many people are involved in healthcare.

The upcoming 2012 election will continue to lead the headlines.  A key point that Scott Reed brought up is to see if the election is a discussion of unemployment and its issues, or a referendum on our current president.  We can only hope that the dialogue remains professional throughout the campaign.

With regards to national politics, there were numerous key states pointed out for the primary season, which include Florida, North Carolina, South Carolina, Colorado, Wisconsin, New Hampshire, Iowa, and Pennsylvania, to name several

As it relates to HUD and its status on the Hill, like every other element of Washington, there is lots of discussion going on regarding the massive budget cuts being contemplated.  Among the most important and relevant items that were discussed during the Washington HUD and Administration Update was the point that HUD 232 and 242 are both money-making programs for government, and that both of these programs have a major job creation element, which is business point Number 1 in Washington these days.

The healthcare reform discussion was intriguing.  The battle between cost-cutting and efficiency versus jobs was also a key point being debated.

Much more at our level was the discussion led by Roger Miller and his senior leadership team from HUD.  Roger, the HUD Lean program for 232 financing, built practically from scratch, definitely seems to be taking hold.  Congratulations on all dimensions of this program.  Michael Vaughn, please accept our public congratulations for becoming the Director of the Office of Residential Care Facilities; the combination of bringing in outside contractors plus the hiring initiative of 2011 will hopefully resolve the backlog and “queue” that currently exists today.  Your goal is shared by all.

Commissioner Ryan – Good luck with one of the most challenging jobs in Washington.  Many thanks for sharing some of your issues, and all we can say is–we have your back!

Things change, yet in many dimensions, they stay the same.  It’s hard to discuss and break down all of the amazing dynamics that go into doing business today. Cambridge’s trip to Washington was just one of these many dynamics that are part of managing a successful business.  I hope you enjoyed the update.

One of the last things I ever thought I would be involved in when I finished graduate school was participating any form of healthcare, other than visits to see the doctor, dentist, or for my eye exam.  But lo and behold, life’s changed quite a bit since the early 90′s; now, Cambridge’s daily professional world focuses on senior housing and healthcare financing investments.  What a change!

I recently participated in the 2011 Healthcare and Medical Facilities Conference held by rejournals.com on May 18, 2011.  I was part of the introductory “State of Healthcare and Real Estate Industry” panel. Thanks to rejournals.com for having me; it was great being part of your group!

What I have learned, and what we discussed on the panel, is that healthcare real estate to date has barely been impacted by the economic downturn.  A point worth noting is that where most other industries have peaks and valleys in overall spending and have certainly been impacted by the current financial climate, both healthcare real estate and senior housing real estate spending goes up every year, and as such, the economy has had very little impact on those sectors.  In essence, senior housing and healthcare real estate is 100% need-based, and demand is not manufactured or artificial.  Each panel at the conference, including the State of Healthcare and Real Estate Industry; Developing, Investing and Leasing Healthcare facilities; and Designing, Building and Finishing Healthcare Facilities, brought up a similar point.

Of course, concern exists and challenges always abound for both senior housing and healthcare.  The overriding concern is the impact of the healthcare reform that took place during 2009/2010 on senior housing and healthcare real estate.  Though nobody knows for sure how this impact ultimately will be felt, since it’s doubtful that anyone in the audience has read the several- thousand-page law, everyone expects some form of change.  It seems that the consensus overall is that everyone in the room will need to tighten their belts and provide more services for less cost.  Funny how things work!

All in all, relative to other areas of real estate, the senior housing and healthcare environment is positive, and there were a lot of smiling and happy faces at the conference.  Let’s hope this continues.

It’s been many years since I graduated with an MS degree in Real Investment Analysis and Appraisal from the University of Wisconsin-Madison, and I’ve been fortunate to become re-engaged in alumni efforts involving the MBA program over the last few years.  Along with attending various meetings and other activities, I’ve joined the Board of the Graaskamp Center for Real Estate, and I had pleasure of being at the Spring Board Meeting in Chicago a few weeks ago. Wow! After attending this meeting, it feels like I’ve been out of graduate school for a very long time…even longer than the years indicate.

A tremendous group of speakers, highlighted by Dean Adler, CEO and co-founder of Lubert-Adler, presented at the meeting, titled US Real Estate Markets – The Next Decade.  I continue to feel amazingly fortunate to have attended the University of Wisconsin – Madison and been part of its real estate program, and even more fortunate to have applied my knowledge and skills towards finance and investment in senior housing since the early 1990’s.

As Dean Adler and many of the other speakers indicated during the board meeting, we’ve seen lots of improvements in the capital markets, yet they are still a long way away from where they were from 2004 to 2007, and everybody is paying for the excess that took place during that time.  There were some very interesting thoughts and comments that were brought up, and I’ll highlight a few that might be of interest to senior housing and other commercial real estate participants.

The keynote address by Dean Adler broke down real estate capital into a few specific eras:  The pre-2008 era; 2008 – 2010; and 2010 – 2014.

- Prior to 2008, capital was plentiful and undisciplined. 

- From 2008 – 2010, there was a 40 to 60% loss of value, little to any debt available, and very  poor real estate fundamentals.

- From 2010 to 2014, Dean predicts that we are getting to a tipping point for many assets. We will see banks begin selling assets again, and a market that, as a result of extremely low interest rates and lack of opportunities, will have a lot of capital and lots of buyers for those assets that are performing well.  He spoke extensively about the challenges in retail, with the stronger retailers getting stronger and the weaker retailers getting weaker, and also took some time to talk about the other product types, and made some very good points about hospitality, with an emphasis on full service business hotels in major markets as the most desirable property.

- Other speakers covered a wide range of topics representing many different types of real estate users and capital providers.  I was still amazed by how few people in the room knew anything about, nor wanted to discuss, senior housing, and how many people appeared to want to compete for these same types of assets.

All in all, I was impressed with how positive and optimistic everybody in the room continued to be, despite what has been widely proclaimed as a once-in-a-lifetime economic downturn.

Feel free to call at 312-521-7600 or email me at jd@cambridgecap.com with any thoughts or comments.

I was recently in New Orleans to give a presentation to the American Health Care Association (AHCA) Independent Owners’ Leadership conference.  I have not been in New Orleans since Hurricane Katrina, and frankly, from what I saw in the tourist areas and around my hotel, there was no evidence of Katrina anywhere.  Since the conference took place after Mardi Gras, those of us in attendance were not in New Orleans for beads or parades, but to collaborate on and share ideas about the senior housing and healthcare industry.

My presentation was titled Senior Housing and Commercial Real Estate Capital: Drinking from the Same Fountain…Blue Skies Ahead or a Storm Coming? You may view the entire presentation here, but below I offer a brief summary:

-           There’s been a huge recovery from the depths of the capital crisis of Fall 2008.

-           However, senior housing capital is still challenged outside of HUD, Fannie Mae, and Freddie Mac.

For the nursing home owners in the audience, HUD continues to remain their best option, and we addressed lots of questions regarding its feasibility.

We look forward to receiving deals and follow-up to our discussion.

The independent owners (generally those who own less than five facilities) expressed their concerns during some unfiltered time.  Let’s face it–they are constantly challenged by many people: regulators, their staff, residents, and families.  (At least plaintiffs’ lawyers for liability insurance issues have taken a back seat of late!)  We listened to the owners’ concerns regarding reimbursement, state budgetary issues, aging physical plant, and continued challenges to the revenue stream.  It was great conversation.

At the end of the conference, we concluded that despite all its challenges, long-term care is the business these owners are committed to.  They are clearly the “heroes” of long-term care, and they do a wonderful job for all members of their constituency.  Thank you, Owners, for giving us this opportunity, and we hope to join you again at next year’s conference.  Feel free to contact us anytime with your questions concerning capital and its impact on your business.

As a result of Cambridge Investment and Finance Co.’s acquisition of the four-facility Cottage Living assisted living/memory care portfolio in Appleton and Green Bay, Wisconsin, I’m happy to be part of the Direct Supply Executive Operators Forum/CEO group that meets quarterly in Milwaukee.  Many thanks to Direct Supply and Brad Klitsch, their Senior Vice President of marketing, for hosting these quarterly meetings.

At the most recent meeting, I had the opportunity of meeting Direct Supply’s founder and CEO, Bob Hillis, and hearing him speak to the group. He was one of a select few founding members of the Alliance Partners, a collaborative industry advocacy group, and is very closely associated with the American Health Care Association.

Bob is uniquely generous with his time, spending much of it lobbying on behalf of long-term care and senior housing interests.  In his presentation to the CEO group, Bob shared a unique, businessman’s view of Washington life today.  In short, Bob echoes the views of senior members in Washington whose sentiment is that both the federal and state governments are “out of money,” and provider costs need to be significantly reduced, such that more and more value will be required from owners and operators; clearly, a very tough requirement.

Bob was kind enough to share many other thoughts and comments from the Hill.  Kudos to him for being an unbelievable advocate for all participants in senior housing and long-term care.

The holidays provide a unique opportunity to reflect, regroup, rest, and relax.  All in all, it’s a great time to spend with family and friends, slow down from the hustle and bustle, and think.  Among the questions that I reflected on:  Why Cambridge for all types of senior housing debt and equity capital requirements?  Thankfully, the holidays provided an excellent impetus for this reflection, and I’d like to share a few of my thoughts below, starting with some of our accomplishments:

• Cambridge was formed in 1983 and began focusing on senior housing in the late 1980′s, with a full-time emphasis on senior housing by 1992.
• Cambridge consists of three separate companies:  A HUD financing group, a conventional mortgage banking group, and a private equity group.
• The Companies all come together as a national senior housing and healthcare financing and investment firm providing debt and equity capital solutions.
• Since their inception, the Companies have closed $6.5 billion in financing of capital transactions, and over $3 billion in senior housing and healthcare financings totaling over 300 separate facilities.
• Though most people know us for our HUD 232 financing efforts, the Cambridge Companies have also acquired 12 separate senior housing facilities, encompassing independent living, assisted living, memory care, and skilled nursing homes.  These acquisitions and transactions were primarily value-added opportunities located in markets throughout the United States.
• My reflection time also challenged me to come up with reasons as to why we have been so successful over such a long period of time.  Some thoughts follow below:
• Cambridge has created an environment to let its team members excel in their individual areas of unique ability.
• Cambridge’s HUD team solely focuses on HUD underwriting and processing, leaving most of the administration and management responsibilities to Cambridge’s conventional mortgage brokerage and private equity team.
• The Companies’ conventional and private equity team also focuses on origination, underwriting, conventional mortgage banking, private equity investment, and asset management.
• Cambridge individuals learn about senior housing from the bottom up.  We develop our own training manuals, handbooks, and tutorials to teach an understanding of senior housing to all of our staff via the “Cambridge way.”
• Cambridge has its own unique “DNA,” and its own unique process called The Signature Experience ^TM.

In short, Cambridge is a unique compilation, where the sum of the parts is greater than each individual element.

Hopefully you’ve enjoyed my thoughts.  The holiday season was personally productive and also gave me the opportunity to give thanks, reflect, envision, and relax.  More thoughts as to where we will be focusing our efforts in 2011 and ideas on how we can work together will follow throughout the year.

I just participated as a speaker at the Senior Housing Conference put on by the Illinois Real Estate Journal on Wednesday December 1^st, 2010, at Chicago’s historic University Club.  Thank you to all the sponsors and to the Illinois Real Estate Journal for a job well done.

The event was sold out, which either indicates extensive interest in senior housing or continued softening in all of the other real estate sectors.  I truly enjoyed listening to a variety of the participants, as everybody brought their unique insight and perspective to the conference.  Here are some of the conclusions that arose from the day’s sessions:

-           The capital markets and the financing industry remain challenged for commercial real estate.

-           Government agency financing, including Fannie Mae, Freddie Mac, and HUD, continues to remain strong for senior housing and long-term care.

-           Fannie Mae and Freddie Mac’s senior housing volumes are off significantly from their peak years in 2006 and 2007, particularly due to the tightening of waiver criteria.

-           HUD 232 Lean financing continues to be one of the leading programs for financing nursing homes.

-           Large-scale investment transaction activity from public real estate investments trusts remains robust, due to strong performance in the sector and REITs’ extremely low cost of capital.  Speakers’ discussions revolved primarily around major transactions completed by Health Care REIT and Ventas, and their very aggressive capitalization rate and “all-in” investment philosophy.

Summary:

Property level performance continues to remain strong in all sectors of senior housing, with the more need-based sectors performing better.  As the year draws to a close, we at Cambridge continue to be thankful for our transition from commercial real estate to senior housing in the early 1990’s, and that we are still participants in such a vibrant industry.

Recently, I updated my conference and public speaking presentation list, which covers 15 years and 50 separate presentations.

As I looked at the list, a few things came to mind about the places that I’ve given these presentations, and the movement of the senior housing industry over the years.

First, our ability to carry out debt or equity transactions is nationwide, and this is evidenced by the number of coast-to-coast presentations and conferences shown on the list.

Second, if you aren’t looking for a cyclical industry, you should stay away from senior housing and long term care; the industry’s up and down trends are a consistent feature, as demonstrated from the topics I’ve covered over the years.

Finally, although the topics of my presentations may have changed with each cycle, Cambridge’s expertise hasn’t; we’ve always included information on the ways capital interacts with senior housing for each and every audience.

The good thing is, life has never been dull, and thankfully, we continue to work with people that we started with in the senior housing industry in the early 90′s, as well as with new clients, who we continue to meet every day.