The senior housing and care sector is evolving, and ensuring adequate capital for operations is essential to driving quality services and long-term success. Recognizing this critical need, NIC has established a dedicated Capital for Operations Focus Area Committee focused on understanding and growing the role of operational capital in senior housing. Organized into three subcommittees, this group is actively working to define key terms related to this topic, to explore financing opportunities, and to draw lessons from other industries which may help senior housing providers access capital for their operations for the long-term. Select committee members met recently at the NIC Fall Conference to solicit feedback from key industry leaders on these very topics.
Why Capital for Operations Matters
For decades, the senior housing sector has heavily relied on real estate-backed financing to support growth. However, the focus must shift as the sector looks toward a future where the demand for high-quality services continues to expand, a demand that relies on operating companies to execute. Real estate connected capital cannot alone sustain this growth. While real estate assets are foundational to senior housing and care offerings, they are optimized when paired with exceptional operations that drive customer engagement and satisfaction. Simply put, without quality operations, there can be no quality returns.
Even the largest senior housing capital providers cannot thrive solely through the ownership of real estate that is not paired with high-performing operations. This underscores the importance of ensuring that capital sources are available and structured to support not only the real estate, but also the day-to-day operations of senior housing.
Defining the Landscape
One of the committee’s key objectives is to bring clarity and consistency to the concept of “Capital for Operations.” To achieve this, the Definitions Subcommittee is developing a comprehensive glossary that will provide clear definitions for key stakeholders related to this topic, including “operator,” “manager,” “real estate owner,” and “enterprise.” Having agreed-upon terminology will be essential for attracting new sources of capital to the sector and providing external investors with a deeper understanding of senior housing constituent groups.
Expanding Financing Opportunities
The Finance Subcommittee is tasked with broadening the range of financing options available to operators in the senior housing ecosystem. A major hurdle in this area is the need for increased education and understanding about how to best structure deals for cash flow-based financing. While healthcare lenders often lend on cash flow, this practice is not widespread in the senior housing sector, especially for managers and operators who typically do not hold real estate assets.
The Finance Subcommittee is focusing on identifying capital sources and supporting educational efforts that effectively outline the unique dynamics of senior housing operations. The goal is to bring thoughtful operational capital into the sector. In addition, dialogue with lenders will be enhanced to better educate existing senior housing stakeholders about the qualifications needed to obtain operational capital.
Learning from Other Industries
The Research Subcommittee will initially examine the lodging (hospitality) sector to understand what learnings may be helpful for senior housing in terms of capital and operations. While perhaps not as operationally complex as senior housing, in that elements of longer-term ‘housing’ and ‘care’ are notably absent, the lodging industry has a number of nuances and complexities within its business that could provide important takeaways for the sector. Ultimately, the goal is to provoke thoughtful discussion and stimulate the development of potentially innovative solutions.
Conclusion
The senior housing sector is at a crossroads, where societal and economic forces are converging to create both challenges and opportunities. With the aging population set to grow exponentially over the next few decades, the demand for high-quality, personalized care will only intensify. As shared by Pete Stavros, Founder of Ownership Works, at the NIC Fall Conference, we need to look at alternative models to structure and capitalize our businesses. Better capitalization is going to be a key component of success for the industry moving forward.
Beyond the need for financing operations, this very dialogue reflects a broader strategic shift. Forward-thinking stakeholders will recognize that future success hinges not solely on real estate investments, but also on the ability to deliver healthcare-integrated services, personalized experiences, and operational efficiency. As value-based care models gain traction, senior housing will increasingly intersect with healthcare delivery, pushing operational capital to the forefront of investment strategies. To best respond to the increasing operational complexity, those who can secure and deploy growth capital effectively will be best positioned to lead the sector into a future where the quality of resident life is as valuable as the physical assets that house it.