By Al Barbarino
Regardless of healthcare reform, the United States’ elderly population will skyrocket over the next two decades.
It’s a fact that Michael Berne, managing director of Lee & Associates’ senior housing group, is well aware of as he prepares his firm for unprecedented growth in the healthcare and senior housing sectors.
“The industry is just exploding,” said Berne, who joined Lee & Associates in April, spearheading the firm’s senior housing group with longtime former Jones Lang LaSalle colleague Richard Donohue. “This is going to generate many, many, many more senior housing developments throughout the country, resulting in hundreds of new facilities, sites, buildings, and the need for additional financing.”
Healthcare expenditures account for roughly 20 percent of current GDP, at roughly $2.5 trillion dollars. By 2015 alone, that number shoots up to $4 trillion on an annual basis, Berne said.
As “baby boomers” enter their elder years, the population of people in the United States 65 and older is expected at least to double by 2030; and the population of those 85 and older, for the first time in history, is the fastest growing segment of the population, according to data from the U.S. Department of Health & Human Services.
The impacts are already evident, as developers begin work on multi-facility projects throughout the country, and Berne launches an aggressive hiring campaign at Lee & Associates to keep up with the growth.
Within four years, he plans to add 10 principals and 28 associates at the firm, just within the core senior housing group. He is confident that his group — involved in all aspects of the buying, selling, financing and refinancing of senior housing, medical office building and ambulatory service facilities — will rise to the upcoming challenges.
The key to success is a blend of real estate and healthcare expertise, Berne said.
Every meeting and every deal since the group’s inception has coupled Berne, who has more than three decades experience in healthcare and senior housing, with “boots-on-the-ground” real estate people within the company.
“We combine in-depth knowledge of healthcare and real estate knowledge in a way that very few of our competitors can, giving us a distinct advantage,” said Berne, who has held roles as principal, founder and/or director of senior housing and healthcare groups at JLL, Cushman & Wakefield and Grubb & Ellis, among others.
He was previously a partner and head of health law departments at several major law firms; and he served as director of the Hospital Division of the New York Attorney General’s Office and NYS Medicaid Fraud Unit, investigating hundreds of hospitals, nursing homes and adult homes.
“My early training has proven to be of extreme value,” he said. “Understanding the underlying business is absolutely critical to adequately representing buyers, sellers and financial organizations in this industry.”
In a recent transaction, for example, Lee & Associates represented seller Father Murray Nursing Center (part of the St. John hospital system in Detroit), convincing the buyer, long-term care provider Olympia Group, to pay a significantly higher premium for the facility.
“We showed them that a minor investment to expand the physical therapy division would result in significant NOI gains, and Olympia went for it,” Berne said. “The client said to us, ‘if you feel you ever need a reference, use us.’”
As the sector becomes particularly attractive for young people entering the business, Berne is cautious, making sure new hires are equipped with the in-depth healthcare knowledge that is crucial in solidifying such deals.
“We spend an inordinate amount of time educating the young folks on the intricacies of the healthcare industry, not just the real estate industry,” he said.
No healthcare conversation seems complete without at least grazing the health insurance reform initiated under President Obama’s Affordable Care Act.
Berne called the reforms the “first baby step to improving healthcare,” but added that the objectives of both the President and Republican nominee Governor Mitt Romney are similar.
“Regardless of who is President, they have a mission to see that a vast majority of the population gets adequate healthcare… that translates for people in the business as making things more efficient, building more facilities and buying and selling more facilities,” he said.
“Our business will only grow, regardless of who is President, and real estate in the healthcare world will expand tremendously, regardless of who is president,” he added.
“The only thing that we can hope for our children is that the quality and cost get controlled appropriately, and that when you combine access, cost and quality, you come up with a health system that provides 98 or 99 percent of the population with healthcare that, as a country, we can be proud of.”
Berne’s current engagements include the disposition/financing for Payton (NY), a 280-unit skilled nursing facility; disposition of fully entitled 47 acres (ME) and entitled land in (FLA) (both for seniors housing); financing of a projected 50 facilities of assisted living/memory care for the Kaplan Development Group (US); disposition of an adult day care facility (NJ) and disposition of 18 skilled nursing facilities (PA).
During his career, Berne arranged the acquisition (including financing) of a portfolio of six assisted living facilities in Florida and New Jersey from Carematrix. He arranged the sale of assisted living facilities including Heritage at Dartmouth (MA); Eden Group (NY); Heritage at Danvers (MA); skilled nursing facilities Parkway Manor (NJ); Saybrook (Conn); Father Murray (MI); MOB’s Greenville Medical Office Building (Texas); and 34 South Bedford Road Medical Center (NY).
