SBRA REIT Stock – Where They Stand Today

SBRA REIT Stock – Where They Stand Today

If you are an investor that is seeking a steady and reliable income builder to add to your portfolio, consider looking into REITs as a viable option. 

What is a REIT?

REITs, or Real Estate Investment Trusts, are the equity equivalent of owning a diversified portfolio of real estate holdings, and act as an excellent hedge against market volatility and downside risk. We mentioned that REITs provide a high dividend return to unitholders and that has to do with the regulatory conditions REITs operate under. 

By law, REITs have to pay out at least 90% of their net income in the form of dividends, which are typically paid out quarterly or monthly. In all, there are hundreds of different REITs that span nearly every imaginable industry from cell towers to malls to apartment buildings to data centers. There is a REIT for every possible form of real estate.

Sabra Health Care REIT

Sabra Health Care REIT (NASDAQ:SBRA) is a healthcare REIT that operates over 425 different healthcare facilities across the United States and Canada. Sabra actually has a total of 609 investments which includes a joint venture that has them oversee 158 senior facilities which are owned by operators instead of leased. 

Sabra’s current stock performance

The REIT has a market cap of $3.77 billion USD at the time of this writing, and boasts an enterprise value of $6.5 billion USD. Sabra REIT is presently trading near its 52-week high price at $17.88 per unit, and has a 52-week trading range of $10.65 to $18.95, but hit rock bottom in March of 2020 at $5.11 per unit. Trend-wise, Sabra is trading right at its 50-day moving average and higher than its 200-day moving average signalling an upward trend as it heads into its Q2 earnings call on May 5th. 

Outlook for Sabra Health Care REIT

The healthcare industry presents several bullish factors that help to present the case for Sabra’s potential long-term strength. First, most hospitals and senior facilities have residents that are subsidized by government healthcare plans which are about as stable as it gets for consistent income. Secondly, senior facilities were hammered by the COVID-19 pandemic, but with the ongoing mass vaccination efforts, positive cases have plummeted by 99% according to Welltower (NYSE:WELL), one of the largest senior facility REITs in America. Finally, the Aging Boomer era is coming, with early estimates of 3 million Americans turning 65 every year until 2029, and by 2030, 20% of the total population is expected to be 65 or older. 

Sabra also has excellent fundamentals with an FFO of 182.9% over the past five years and one of the highest FFO rates in 2020 during the COVID-19 pandemic amongst healthcare REITs. FFO or Funds From Operations, is a method in which REITs calculate their cash flow from operations. Sabra is anticipating to continue to increase its dividend yield which is currently at 6.6%, one of the highest in the healthcare REIT industry. With a weighted average of eight years remaining on aggregate lease terms, and an impressive 20.5% NOI CAGR or compound annual growth rate, since 2011, Sabra makes for an intriguing investment on the future of the American healthcare system. With a strong dividend yield and a balanced asset mix, Sabra is a solid REIT to add for steady income flow to a diversified portfolio. 

Starting an Assisted Living Facility in Michigan

Starting an Assisted Living Facility in Michigan

Starting an Assisted Living Facility in Michigan: A Guide

Are you looking to start an assisted living facility in Michigan?

What unique problems might you run into? What’s special about assisted living facilities in Michigan? What steps can you take today to make your business idea a reality?

In this article, we’ll show you the specific laws and regulations surrounding assisted living facilities in Michigan – including the difference between an “assisted living facility,” an “adult foster care facility,” and a “home for the aged,” – and we’ll guide you toward the best course of action.

What’s Different About Michigan Assisted Living Facilities?

Isn’t assisted living the same everywhere? Why should starting an assisted living facility in Michigan be any different than anywhere else?

Well, no, assisted living is not the same everywhere. Rules and regulations for assisted living facilities vary from state to state. There actually isn’t any federal regulation, so paying extra special attention to your state’s laws is paramount.

Just because you have experience opening a successful assisted living facility in California doesn’t mean that experience will necessarily transfer to opening a successful assisted living facility in Michigan. The laws, regulations, and quality control might be completely different, and so one of those elements might radically change your business plan. In fact, depending on your organization’s goals and quality of care, you might not even be opening just an “assisted living facility.” It might actually be called something completely different, as you’ll see.

Furthermore, the residential care business, as well as real estate in general, is all about location. If you’re not willing to do some research on what’s different about assisted living in Michigan, you’re not off to a good start.

Luckily, we’re here for you. We’ll break down everything you need to know.

Cost of Care in Michigan

The Genworth Cost of Care Survey 2018 breaks down the cost of assisted living nationally and by state. Now, we know you’re looking to purchase an assisted living facility – not just assisted living services for a loved one – but this data might help you determine your competition’s rates. That could provide you with some valuable information on how you can outperform them, whether it’s in service, quality, or price. It’s a good place to begin.

Nationally, the cost for assisted living is pretty high: it works out to about $133 per day for most, and $278 per day for a private room. Full-time home health aide services aren’t that much better, either, with an average of roughly $127 per day.

The costs for assisted living in Michigan are both higher and lower than the national average, so that indicates, for certain services, the market is ripe for arbitrage. The median cost for assisted living in Michigan is $126 per day for most, and $300 for a private room. Full-time home health aide services work out to roughly $137 per day.

The cost of assisted living in Michigan isn’t all that competitive, then. As we talked about in a previous article, the proportion of older Americans is growing every day – and so, then, is the demand for assisted living care.

What else about assisted living in Michigan do you need to know?

The Difference Between “Assisted Living Facilities,” “Adult Foster Care Facilities,” and “Homes for the Aged.”

For one, regulatory agencies in Michigan don’t use the term “assisted living facilities.” Instead, they prefer the terms, “adult foster care facilities” (also known as an AFC or AFC home) and “homes for the aged.” Among other things, this means that assisted living facilities in Michigan don’t necessarily have to be licensed. The Department of Licensing and Regulatory Affairs only licenses adult foster care facilities and homes for the aged, and the licensing requirement is different for both.

This all might sound semantic, but it’s actually incredibly important. In order to qualify for an SBA 7(a), the primary method of financing for most assisted living facilities, you’re very likely going to need to be licensed.

And, before you apply for licensing in Michigan to start your organization, you’re going to want to know if you want to make it an AFC or a home for the aged. Each of them are designed, of course, to provide care to individuals who need some sort of assistance, but there are important differences.

Assisted Living Facilities in Michigan

Since Assisted Living Facility doesn’t technically refer to any sort of licensing, it’s possible that some room and board facilities and certain types of senior housing don’t need to be licensed, as we mentioned before, so it’s important to understand the rules and regulations to avoid any legal issues. Unlicensed facilities may not qualify for an SBA 7(a). There are other financing options available for your venture, but the SBA 7(a) is by far the most popular when starting or buying an assisted living facility.

For consumers, this means that the term “assisted living facility” only exists in Michigan to borrow some brand name recognition from other assisted living facilities that exist across the nation. Assisted living facilities in Michigan, then, may refer to any type of residential facility that provides some sort of personal or medical care.

Adult Foster Care Facilities

What is an adult foster care facility and how does it differ from other types of assisted living facilities?

As stated by The Department of Licensing and Regulatory Affairs,

“Adult foster care is a specific type of assisted living, as outlined in Public Health Code Act 218 of the Michigan legislature.”

It goes on to outline the exact provisions of supervision, personal care, and protection for every AFC resident, as well as the requirements for room and board – all of which are fairly straightforward and easy to understand.

In order to develop a more comprehensive idea of the differences between adult foster care and every other type of facility, it might be easier to focus on what adult foster care isn’t. As they list in the article, adult foster care isn’t:

  • A nursing home, because the residents don’t require continuous care.
  • “It is not a room and board situation, because 24-hour supervision is provided.” Now, this is a little confusing and contradictory. The “Adult Foster Care Tutorial” says just a few sentences above that, “Foster care means the provision of supervision, personal care, and protection in addition to room and board.” When they wrote this, I’m sure they meant it isn’t strictly a room-and-board situation, because of the necessity for high-quality care. (Aren’t you glad we’re going through all this data for you?)
  • Not strictly a home care service, because you need physical real estate.
  • And, of course, it excludes other facilities that require different licensing, like “Homes for the Aged,” “Hospitals,” “Facilities Operated by the Department of Community Health,” and “Children’s Facilities.”

So, in that case, what makes a home for the aged any different from an adult foster care facility?

Home for the Aged

Also, as stated by the Department of Licensing and Regulatory Affairs:

  • A home for the aged is a specific type of assisted living, as outlined in Public Health Code Act 368 and the administrative rules.
  • “Home for the aged means a supervised personal care facility that provides room, board, and supervised personal care to 21 or more unrelated, non-transient individuals 55 years of age or older. Home for the aged includes a supervised personal care facility for 20 or fewer individuals 55 years of age or older if the facility is operated in conjunction with and as a distinct part of a licensed nursing home.”

The second rule is by far the most important: adult foster cares have a specific cap on how many individuals can be members of the facility. A home for the aged doesn’t necessarily have that same cap.

And here’s what a home for the aged is not, with some explanatory comments thrown in:

  • It is not a nursing home. (The licensing required for nursing homes is different from the licensing required for homes for the aged).
  • “It is not a room and board situation.” (Here we go again… They probably mean it isn’t strictly a room and board situation, but it might be a good question to ask the Department of Licensing and Regulatory Affairs when you apply).
  • The other two rules are the same as the ones stated above for adult foster care facilities: It’s not strictly a home care service, because you need physical real estate.
  • And, of course, it excludes other facilities that require different licensing, like “Adult Foster Care (AFC),” “Hospitals,” “Facilities Operated by the Department of Community Health,” and “Children’s Facilities.”

Questions to Ask Yourself Before Applying for a License

Finally, there are some important questions you should ask yourself before determining this route is the one you want to take – whether you want to apply to start or buy an adult foster care facility or home for the aged. Let’s review those questions now.

  • Do you believe you have the required business expertise to successfully run one of these facilities?
  • What insurance are you going to buy?
  • How are you going to finance? (Hint, hint: We have an article on that…)
  • And, most importantly, are you able and willing to have the government look through you and your family’s financial history and criminal records to prove that you’re an upstanding citizen?

In order to run a licensed assisted living facility in Michigan, you have to make a positive impression on the public. Otherwise, the government will likely not grant you a license to operate.

Think about it from the consumer’s perspective: No one wants to invest hard-earned money in someone they can’t trust. With assisted living prices as high as they are, that’s doubly true.

So, if you’ve had a run-in with the IRS, or if you’ve declared bankruptcy in the past ten years, or if you’ve had multiple run-ins with the law, it’s likely going to be that much more difficult to secure a license for your assisted living facility. That’s simply the reality of what you’re about to go through.

That doesn’t mean, however, that it’s impossible. Communication is important, so make sure to talk with whoever’s in charge of licensing and be ready to explain any moral shortcomings you may or may not have.

Conclusion: Starting or Buying an Assisted Living Facility in Michigan

As you’ve learned, laws and regulations regarding assisted living facilities vary from state to state. Starting an assisted living facility in Michigan is not the same thing as starting an assisted living facility in California. For that reason, it’s incredibly important to do state-specific research.

The average cost for assisted living in Michigan is a little bit lower than the national average for most assisted living setups, at $126 per day, and a little bit higher for private assisted living (that is, the elderly person has his or her own private room in a facility) at a much higher $300 per day. This information could be central to your business strategy. If you have experience opening assisted living facilities that specialize in low costs for private rooms, you might want to consider expanding into the Michigan markets.

The most important thing you’ll need to know about purchasing an assisted living facility in Michigan, or starting one from scratch, is that there’s a difference between “room and board,” which are unlicensed, and “adult foster care facilities,” and “homes for the aged.” The latter two are licensed differently, but the principal difference is that a home for the aged is limited to residents age 55 and older and can’t care for people with some other specific needs. According to the Adult Foster Care Facility Licensing Act, adult foster care facilities can have a maximum number of residents based on certain characteristics of the facility itself, but cannot be licensed for more than 20.

We hope that this guide has pointed you in the right direction for starting an assisted living facility in Michigan. Once you know the differences between each type of facility, it becomes that much easier to fill out the requisite paperwork and apply for your license.

We wish you the best of luck.

Loans to Purchase an Assisted Living Facility

Loans to Purchase an Assisted Living Facility

Looking to Purchase an Assisted Living Facility? Everything You Need to Know About Financing the Deal

Do you want to purchase an assisted living facility? Here’s everything you need to know about financing.

It’s a fact of life that everyone’s getting older every day, but, if it seems like there are more elderly people alive today than there were ten years ago, that’s because, well, there are

Thanks to modern medicine, the proportion of Americans who have made it to at least 90 years old has doubled since 1980. By 2050, the US Census Bureau predicts that number will double again, with the proportion of 90-and-older Americans making up a whopping 10 percent of the population.

Those people will need somewhere to live. Many are opting for in-home care support, but it’s safe to say that the current assisted living market is destined to scale. Buying an assisted living facility is – very likely – a sound investment that serves an ever-growing portion of the population.

In this article, we’ll give you a primer on the most popular loan type for financing an assisted living facility: an SBA 7(a) loan.

We’ll show you SBA 7(a) loans work, tell you how to qualify for an SBA 7(a), where to apply (what lenders are approved by the SBA), rank the top lenders by total loan volume and approved loan count, give you an overview of the exact documents you’ll need to apply, and then we’ll wrap it all up with a recap.

Ready to get started? Your dream of starting your own assisted living facility starts right now.

What is an SBA 7(a) Loan? And How Can I Use One to Purchase an Assisted Living Facility?

An SBA 7(a) loan is one of the most popular loan programs offered by the Small Business Administration.

The SBA can guarantee you up to $3.75 million on a $5 million loan. This way, you’ll have the necessary capital to invest in an assisted living facility – or you can use the money to make improvements to one that already exists. Some sites, like The Balance Small Business, list the maximum amount you can receive from an SBA 7(a) is only $2 million, with a $1.5 million guarantee. This is wrong – and, more importantly, possibly not enough money to fund your venture. According to the US Small Business Administration, the maximum loan amount for an SBA 7(a) is $5 million.

 You can use it for real estate, working capital, equipment, debt refinance, and change of ownership.

The terms last 25 years for real estate, 10 years for equipment, and 10 years for working capital or inventory.

The interest rates are relatively low, ranging from 7.75% to 10.25%.

These two factors – length and interest rate – make the SBA 7(a) one of the best and most popular options for securing long-term funding for assisted living facilities.

As you’ll learn, though, you’ll still need to look into other options, as well.

What Do I Need to Qualify for an SBA 7(a)?

  • Your business must be listed as for-profit. SBA loans aren’t given to nonprofits.
  • It must be included in the list of eligible industries for SBA loans. (No problem there, as long as you’re looking to start a licensed assisted living facility or nursing home; only some residential care facilities are ineligible according to the SBA – but more on that later).
  • Invest (at least some of) your own equity. The SBA wants to see that you’re not strictly investing other people’s money.
  • Have net revenue each year for the past three years totaling less than $7.5 million.
  • Have fewer than 500 employees.
  • Have a net income lower than $5 million.
  • Have a tangible net worth less than $15 million.
  • Not be incarcerated or on parole.
  • Have utilized all alternate forms of financing first (like personal assets).
  • Plan to do business in the United States.
  • Have proof that you aren’t delinquent on any outstanding loans (like your mortgage, student loans, or automobile loans).

It might seem like a lot, but the gist of it is this: The SBA needs to know that you’re 1) actually operating a small business in the United States, and 2) able to repay the loan that you’re looking to take out.

How Do I Find an SBA 7(a) to Purchase an Assisted Living Facility?

First, as we mentioned briefly above, you need to exhaust all other financing options before you apply for an SBA 7(a) loan to buy an assisted living facility. SBA7a.Loans has a great guide on other non-SBA financing options for your small business – but most people end up needing extra money in the form of an SBA 7(a), anyway, after pursuing those other options.

But Where Do I Go to Get an SBA 7(a)?

You go to a lending institution, not the SBA. The SBA only guarantees loans that you take out from the bank. By guaranteeing the loan, the SBA ensures that, if you become delinquent, you’re covered for a certain amount of the loan. For a standard 7(a), that’s 85% on any loan up to $150k and 75% for loans greater than $150k.

The Top 10 Lenders for the SBA 7(a) – Assisted Living Facility Financing

Here are the top 10 Lenders for the SBA 7(a) by number of loans and total loan volume according to the US Small Business Administration as of June 30, 2019:

  1. Live Oak Bank – 692 Approved Loans – ~$1 billion
  2. Wells Fargo – 2,316 Approved Loans – $619 million
  3. Huntington National Bank – 2,731 Approved Loans – $500 million
  4. Newtek Small Business Finance – 679 Approved Loans – $467 million
  5. Byline Bank – 342 Approved Loans – $407 million
  6. Celtic Bank Corporation – 584 Approved Loans – $368 million
  7. JPMorgan Chase Bank – 1,428 Approved Loans – $361 million
  8. First Home Bank – 1,185 Approved Loans – $304 million
  9. US Bank – 1,976 Approved Loans – $288 million
  10. KeyBank – 389 Approved Loans – $217 million

If you’re looking for a loan to buy an assisted living facility, these are fantastic resources. Each link leads to the bank’s webpage on opening small business credit lines. Even if one lender doesn’t like your business plan, you’ll have plenty of other options.

It’s best to start with the banks that already give out the most SBA 7(a) loans before you target the smaller banks. Or, if you’re looking to get approved for a larger loan, you might want to look for the banks with a small “Approved Loan” count to loan volume ratio, like Live Oak, NewTek, Byline, Celtic, and KeyBank.

When I’m Applying for an SBA 7(a) with a Lender, What Information Do I Need?

So you made it this far, up to the point where you’re ready to meet with a lender to discuss whether or not they’ll finance your assisted living facility. But you’re worried: What do I need to bring to the table? What information are most lenders looking for?

This is a difficult question to answer because it’s going to change from lender to lender. For the most part, though, lenders are going to want to know the following:

  • Your credit score. Your credit score is literally a numeric value that determines how likely you are to pay back a loan. When you’re taking out a business loan, the bank is obviously going to want to know that you’re personally responsible with your credit. That’s why having a good credit score is important when you’re looking for assisted living facility loans.
  • Business plan. Lenders will also want to see a carefully laid-out strategy for the next few years, likely including an executive summary, business overview (legal structure, location, type of business, etc), an operations plan, a competitive analysis, and so on. Most importantly, you’ll need a projections analysis so that lenders know when and how you plan to repay them.
  • Collateral. While it isn’t 100% necessary, it’s always good to show that you have skin in the game; that you’re willing to put your own assets on the line.
  • Profitability. You’ll also need to show, of course, that your business has significant revenue (above $100k per year) and is profitable.

What Exact Documents Will I Need?

If this all sounds too complicated, just keep this in mind: Your loan officer is there to help.

Generally, at a minimum, you should expect to provide three years of business and personal tax returns, as well as current financial statements. As we’ve mentioned time and time again, though, this will vary from lender to lender, and some lenders will weigh certain factors over others.

Go to one of the SBA-approved lenders mentioned above and ask about SBA loans for assisted living facilities. The loan officer is there to help, and he’s probably the best resource you have. He’ll guide you through how to find and fill out all the paperwork you’ll need.

If you have a great business idea for a new assisted living facility but you aren’t familiar with all the jargon and minutiae that naturally comes along with starting a new business, that’s okay. Work with others to help fill in the missing gaps in your knowledge.

If you want, the SBA has an extensive eligibility questionnaire designed to help you figure out whether or not your assisted living facility qualifies for an SBA loan. As you’ll probably note on page two, not all residential care facilities qualify – only those that are licensed as nursing homes and assisted living facilities.This is almost undoubtedly just to secure a certain standard of care for consumers – when in doubt, ask the SBA whether or not you’ll qualify.

What Can I Do Today to Be One Step Closer to Funding an Assisted Living Facility?

Well, if you’re looking for practical advice that you can act on today, first, you can contact the Small Business Administration to ask them questions about your ability to qualify for an SBA 7(a) – or a different loan type.

Additionally, you can schedule a meeting with an SBA-approved lender in your area, like one of the ten we ranked above.

The SBA and SBA-approved loan officers both have a vested interest in loaning money to reputable businessmen and businesswomen with ambitious – yet reasonable – goals. Let them guide you.

Recap: Looking to Purchase an Assisted Living Facility? Here’s Everything You Need to Know

The proportion of Americans 90 years or older is increasing every day – which means the demand for assisted living facilities is also increasing every day. If you’re looking to finance an assisted living facility, there’s never been a better day than today.

The SBA 7(a) is the most popular type of loan for financing assisted living facilities, but you’ll have to prove that you’ve tried other modes of financing, as well, before you qualify.

There can be any number of hoops to jump throw and paperwork to fill out before you actually qualify for an SBA 7(a), but the main two things the bank wants are this: 1) proof that you’re personally responsible enough to repay the loan, and 2) proof that your business can generate enough revenue to repay the loan.

As for exact paperwork, let the SBA help, along with any SBA-approved loan officer. It’s safe to say, though, that at a minimum you’ll need three years of business and personal tax returns as well as updated and current financial statements.

If you have any other questions, comments, or concerns, make sure to contact us. We’ll help you find ways to purchase an assisted living facility.