The benefi ts of the regionally focused operator

All seniors housing is local. That’s Raymond W. Braun’s belief when it comes to developing financing partnerships with operators. Braun is president of Health Care REIT, Inc., a Toledo, Ohio–based company that owns 475 seniors housing properties, including independent living, assisted living, and skilled nursing. At the 2007 NIC Western Regional Symposium, he explained why he likes regionally focused operators, highlighting his experience with Signature Senior Living and its cofounder Steven Vick. Signature Senior Living, formed by Vick and Linda Martin, developed eight Dallas-area sites that house assisted living and Alzheimer’s units. “I think Steven’s a very good example of our approach to doing business with seniors housing operators,” Braun says, “and we’ve enjoyed a mutually beneficial relationship for more than 15 years.” Nursing Homes/Long Term Care Management recently asked Braun to further explain his predilection for operators like Vick.

What is your growth strategy as a capital partner with regionally focused operators?

Raymond W. Braun: Our business model is to provide programmatic relationship financing. We do that by entering into a line of credit with an operator to serve their capital needs over a three- to five-year period. With that line commitment, the operator has the ability to develop and acquire more buildings.

Why are regionally focused operators preferred?

Braun: We think all healthcare is regional in nature. It requires a place, a provider of care, and a patient, and those are all regional. We want to make sure we’re doing business with people who understand the local healthcare delivery system.

What factors contribute to you selecting an operator to work with?

Braun: We look at the integrity of management and track record as a quality employer, provider of quality care, and financial success.

What was it about Steven Vick that made him a good bet financially?

Braun: We’ve known Steven since the early ’90s and have worked with him during his tenure at several companies. He was very well known to us, and we knew that he was a competent professional.

What other projects of Vick’s have you backed? How did those dealings play into your current relationship?

Braun: We first met him when he was with a company called Sterling House, which was later acquired by Alterra. We worked with him at both Sterling House and Alterra. Then he went on to become the CEO of Assisted Living Concepts, and he did an excellent job of running that company.

How was Vick able to turn around Assisted Living Concepts?

Braun: Steven is very focused on his employees and empowering them to continuously improve operations. He’s a strong leader, and he knows it’s important to have his employees behind his vision.

“They give us a prototype building and budget, markets, and a schedule, and then we help them grow their developments.” —Raymond W. Braun

What is Vick’s model for developing assisted living sites?

Braun: Because he is a hands-on operator, he wanted to develop in markets that he could drive to in approximately three hours, and in areas and markets that he was familiar with and would be able to find quality employees.

What did Vick’s business plan and project budget entail?

Braun: He submitted a business plan that involved the development of a certain number of facilities over a certain period with a prototype building and budget—that’s very consistent with how we do business with other operators. Now, his building may be bigger or smaller, or it may be in a different location, but that concept is how we work with our customers. They give us a prototype building and budget, markets, and a schedule, and then we help them grow their developments.

Most REITs require letters of credit that range from 2½% to 5% of the investment amount as collateral to back lease payments. Did you require a letter of credit from Vick?

Braun: We were comfortable with the credit behind the guarantors and felt a letter of credit was not necessary given the guarantees that we had.

How has the occupancy and cash flow of the Paris, Texas, facility compared with those of Vick’s other facilities upon opening?

Braun: I can generally say that all of his buildings, including the Paris facility, are ahead of budget for occupancy and operating income. To that extent, it’s performed consistently with the other facilities.

Raymond W. Braun is President of Health Care REIT, Inc., based in Toledo, Ohio.

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