Adding Clarity to Attract Capital Sources
Unlike many other commercial real estate sectors, senior housing requires access to capital that goes beyond funding the real estate investment in order to grow and sustain quality operations. This need for operational funding necessitates attracting new sources of capital to the sector.
In a previous article, we highlighted the critical importance of having a flow of capital investments for growing operations as a cornerstone for quality and sustainable growth in the senior housing sector. Recognizing that clarity and consistency in terminology are foundational to attracting new sources of operational capital, NIC’s Capital for Operations (CFO) Definitions Subcommittee has finalized key definitions central to this conversation. This article highlights the work of this subcommittee and the unveiling of these foundational definitions.
Why Clear Definitions Matter
Clear and commonly agreed-upon terminology is essential to effectively communicate with external investors who may not fully understand the core stakeholder groups in senior housing. By establishing precise definitions, the sector can more easily attract diverse capital sources—especially those focused on operational excellence and enterprise growth rather than solely real estate-backed investments. This clarity helps investors better understand the distinct roles and responsibilities within the senior housing ecosystem, ultimately facilitating more informed investment decisions.
Defining the Landscape: Key Terms Established
To facilitate clear communication among stakeholders—including lenders, investors, operators, and managers—the Definitions Subcommittee has adopted the following definitions.
Looking Ahead: Defining “Integrated Enterprise”
While significant progress has been made to establish these key terms, important work remains. The Definitions Subcommittee is now turning its attention to defining more complex concepts as it relates to enterprise.
For instance, consider a fully integrated company in senior housing that includes multiple entities:
- Real Estate Owner (either fully owned or joint venture)
- Operator (fully owned or joint venture)
- Manager (fully owned)
Does this integrated structure that has established brand identity equate to greater enterprise value? Clearly defining these terms will help stakeholders better understand how integration, brand strength, and operational excellence contribute to overall valuation.
Conclusion: Building on Clarity for Sustainable Growth
As the sector continues to navigate a rapidly evolving landscape shaped by demographic shifts and increasing demand for high-quality senior housing services, clarity around key terms is not merely academic—it is foundational. Standard definitions lead to better communication; better communication leads to increased investor confidence; increased investor confidence unlocks broader access to operational capital.
Ultimately, the sector’s future success will depend upon our collective ability to clearly articulate value—not only through physical assets but also through exceptional operations that enhance resident experiences and drive sustainable growth.
Special thanks to members of NIC’s Capital for Operations Definitions Subcommittee, Michelle Kelly of National Health Investors, Madisen Medley of Merrill Gardens, Leigh Ann Barney of Trilogy Health Services, Dan Ogus of HumanGood, and Bill Kauffman of NIC.
Definitions:
Capital for Operations: Any capital (debt or equity) used in senior housing and nursing care that invests in or lends to a real estate owner, operator, or manager, and is not secured by real estate.
Manager: Entity responsible for oversight and management of day-to-day business as outlined in a management agreement.
Operator: Entity (often called an OpCo) that assumes business risks and benefits.
Real Estate Owner: Entity (often called a PropCo) that owns the fee simple real estate.