For buyers evaluating an assisted living acquisition, securing financing involves more than presenting a purchase price and a set of historical financials. Lenders want to understand who is behind the transaction, how the community is performing, and whether the buyer has a credible plan for the asset after closing.
In a recent conversation with VIUM Capital’s Grant Blosser, we explored what lenders evaluate when an assisted living acquisition crosses their desks, what can make an underperforming opportunity financeable, and how buyers can prepare before beginning the financing process.
Before evaluating occupancy, cash flow, or other facility-level metrics, VIUM starts with the sponsor behind the acquisition.
That means looking at the borrower’s reputation, track record, and experience operating similar communities. The lender will also look beyond the property being acquired to understand how the sponsor’s broader portfolio is performing.
Not every asset in a portfolio will perform equally at all times. What matters is understanding why certain assets may be struggling, how the operator is responding, and whether there is a credible plan to improve performance.
Only then does the focus narrow to the individual assisted living project and its financial and operational story.
An initial review can begin with a relatively focused set of information.
VIUM typically wants to see the community’s trailing 12-month income statement alongside occupancy data. Recent three- and six-month performance can provide additional context, particularly when current trends differ from the longer historical period.
Lenders will also look at changes in rental rates, expense trends, and staffing costs. Occupancy is especially important in smaller assisted living projects, where the loss of only a few residents may have a meaningful effect on net operating income.
If the initial review supports moving ahead, the diligence becomes more detailed. That can include several years of historical financials, a budget and pro forma, real estate tax information, insurance costs, and the buyer’s assumptions for improving revenue or managing expenses.
Net operating income is an obvious starting point, but the components behind NOI can tell lenders just as much as the final number.
Occupancy is one important part of that picture, but lenders also want to understand what is driving it. Strong occupancy may look positive on the surface, but concessions or placement costs can ultimately affect the revenue those residents generate.
Labor is another major consideration. Staffing costs, agency utilization, and local labor availability can all affect the sustainability of a project’s operating model.
The important point is that these metrics are not evaluated in isolation. Assisted living communities operate in different markets and face distinct challenges, so lenders need to understand the story behind the numbers rather than apply a single benchmark to every acquisition.
An assisted living asset does not necessarily need to be fully stabilized to be financeable.
For an underperforming or value-add acquisition, however, the buyer’s track record becomes particularly important. A lender will want to see evidence that the operator has successfully executed a similar turnaround strategy before.
As Blosser explained, a projected improvement is much easier for a lender to support when the sponsor can point to another community in a comparable situation and demonstrate the strategy's results.
The sponsor’s broader portfolio also matters. A few challenged projects with reasonable explanations may present a very different risk profile than a portfolio showing widespread operational difficulty.
Bridge financing can provide flexibility when an assisted living acquisition is not yet ready for permanent financing.
For an acquisition, a bridge loan can give the new owner time to implement its operating plan and establish a period of stabilized performance. Bridge financing may also be appropriate when an existing asset needs additional seasoning or when a borrower is completing a recapitalization before pursuing permanent debt.
The key is having a realistic path beyond the bridge.
In the type of structure Blosser described, the initial bridge term provides time for the buyer to take over operations, execute its business plan, develop a stabilized trailing operating history, and then pursue permanent financing such as HUD, Fannie Mae, or Freddie Mac. The exact timeline and structure will depend on the transaction, not on a single formula.
Some concerns begin with the sponsor. A history of disputes with lenders, capital partners, or investment partners may require additional scrutiny.
Others emerge at the community level. Lenders generally want performance to remain stable or improve while an acquisition moves toward closing. Unexplained declines in occupancy or rising agency staffing can raise concerns, as they may indicate that the buyer is acquiring a different operating picture than the one originally underwritten.
That does not mean every decline prevents financing. The lender needs to understand what changed, why it changed, and how those changes affect the transaction.
In some cases, the structure of the financing can help address a specific risk.
Blosser shared an example involving an experienced operator that had the opportunity to acquire assisted living communities it had already been operating. The assets were still working through pandemic-era operating challenges and had not yet demonstrated the cash flow coverage typically desired.
However, the sponsor brought decades of experience, a strong financial profile, and solid performance across the rest of its portfolio.
VIUM ultimately worked with its bank partner on a structure that included a sinking fund, allowing a portion of excess cash flow to accumulate in an account and providing additional support for the loan. Most of the communities have since transitioned to permanent financing, and VIUM has completed additional business with the borrower.
The example reinforces a broader point: assisted living acquisition financing is rarely determined by one metric. Sponsor quality, track record, operating performance, and financing structure all contribute to the lender’s view of the opportunity.
Buyers expecting to pursue an assisted living acquisition in the next six to 12 months can begin organizing several items before identifying a specific property:
For a value-add opportunity, buyers should also be prepared to explain what they intend to address immediately after closing and how that strategy evolves over the first year of ownership.
The strongest financing conversations often begin before a transaction reaches the closing table. Bringing a lender into the process early gives both sides more time to understand the sponsor, evaluate the operating story, and determine which financing structure may fit the acquisition.
Whether the opportunity is already stabilized or requires time and capital to improve performance, understanding what lenders will evaluate can help buyers enter the process better prepared.
Whether you are evaluating a stabilized community or an underperforming opportunity, connect with VIUM Capital early to explore potential financing strategies.
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