There are many non-profit seniors housing and healthcare organizations with strong affiliations and/or foundations. Many are focused on servicing the needs of a particular community, leveraging the resources of multi-million-dollar endowments, and enjoying deep support for their mission, financial and otherwise. On the flip side, however, there are many independent non-profit seniors housing and healthcare organizations with a much more challenging outlook—facing changing communities, a lack of outside financial support, and the absence of a parent company safety net.

For those nonprofits that fall into the latter category, now may be a good time to consider exit alternatives, and the future of their organization and mission. Below, we offer five reasons why 2024 is a good time for nonprofits faced with challenging circumstances to revisit the possibility of a mutually beneficial industry exit.

  1. Changing Delivery Models – Originally there were skilled nursing facilities (SNFs), then assisted living (AL), then entrance fee-based communities. While none of these products have gone away, more options have emerged, such as the expanding active-adult segment, as well as an increasing variety of home health care options, each with its own nuances, rules, and regulations. Similarly, funding for long-term care continues to evolve, driving seniors to different services. If an organization is not prepared to evolve with the market, it faces an increasingly difficult competitive future.
  2. Unrelenting Staffing Challenges – Demographics continue to be in favor of seniors housing and healthcare organizations. The long-awaited wave of baby-boomers requiring long-term care is finally arriving and is the main reason for strong investor appetite in the sector. The flip side is that the aging of the U.S. population means fewer workers for all industries. A report by Plante Moran estimates that between 2010 and 2040 the ratio of the workforce to 80-plus population will decrease 58%. While the tide is rising for senior housing demand, staffing challenges represent a dangerous undertow.
  3. Challenging Construction Costs – In the past, many non-profits looked for opportunities to grow their platform and achieve economies of scale. In the current construction market, due to cost inflation and development in completely different industries, it is very difficult to make new buildings and campuses financially viable. Reviewing the entire seniors housing landscape, the National Investment Center for Senior Housing (NIC) reported in April 2024 that senior housing construction starts had fallen to their lowest level since 2010. While the costs are limiting new construction, the good news is that this is an opportunity for existing campuses to get retrofitted instead. Real estate investors interested in senior housing’s positive demographics may benefit from opportunities to purchase buildings below their replacement cost.
  4. Seizing the Initiative – Bloomberg reported in 2023 that 7% of all senior living and care related tax-exempt bonds are in default. This is 700% higher than the default rate in the general tax-exempt bond market. Non-profits with defaulted bond issues are quickly losing their options to maintain control of the future of their communities. As in any business, negotiating from a position of strength provides maximum opportunities to protect brands and legacies of care.
  5. Repurposing Missions – Just as the delivery of care for seniors continues to evolve, so too can the way non-profit seniors housing and healthcare organizations deliver on their missions. By utilizing proceeds to establish foundations and endowments, or by reinvesting in new service businesses for seniors, non-profits can ensure their mission continues in perpetuity.

If any of these topics resonate, reach out to Lument for a strategic options assessment of the most viable alternatives under current market conditions. Whether it’s for an aging “trophy” asset or a pressured portfolio, Lument has the “one-stop shop” expertise to help find the optimal balance of financing, sale, repositioning, or recapitalization. 

In this case study, read how Lument helped a nonprofit realize sale proceeds that exceeded expectations, allowing them an asset-free second act in furthering their mission.