Market Trends in Financing for Senior Housing Options

Recently I was reading an issue of The Senior Care Investor, a subscription-based news service that reports on the “World of Senior Care Mergers, Acquisitions, and Finance,” and doing so since 1948. 

For approximately the last three years, most of the M & A activity has been in assisted living (AL) and memory care (MC).  Senior Care Investor reports that CCRCs are “beginning to make a comeback” as the housing market recovers and prospective residents are again able to use equity in their homes to finance transitions into CCRCs.  The most recent issue also indicates some development money is returning to the skilled nursing facility market, even as overall M & A activity in senior housing is lower in 2015 than in 2014.  

I’ve been watching quite a bit of activity over the last few years in conversions of nonprofit senior housing operations to “for profit” and there is more evidence of that in the latest report. But the most recent issue (Issue 9, Volume 27) also reports on a “rare for-profit to not-for-profit deal,” with a New Mexico-based company, Haverland Care LifeStyle Group, purchasing a new AL/MC community in Oklahoma.  

Also, the Senior Care Investor reports on a faith-based, not-for-profit CCRC provider that has decided to sell an entrance fee model (one that’s in transition to an “all rental” model) that will offer independent living, AL, MC units and nursing home beds.  What happens when senior housing operations are fully “private pay” AND “rental” models AND disconnected from a faith-based organization?  Can they maintain their tax-exempt status? In other words, if the public is paying market rates (and thus higher rates based on any market increases) with no promises of future care if the residents run out of money, is that senior housing enterprise still a nonprofit operation entitled to be treated as exempt from federal income taxes?