Second Act Financial Services soft launched in 2019, only to hit pause a short time later. But now, the financial provider has officially launched its service to help older adults fund their move into senior living communities.
Second Act, now a division of Liberty Savings Bank, provides bridge loans to older adults with the intention of giving them more time and options as they move into a senior living community, according to president and CEO Elias Papasavvas. Through Liberty, Second Act has about $500 million to make available in bridge loan financing.
“For seniors that have a home to sell, they can leverage their existing home equity, get an easy bridge loan to fund their retirement community fees and take their time selling the homes,” Papasavvas told Senior Housing News.
The company’s initial loan product is a home equity line of credit, and prospective residents can use the financing to fund either their monthly rent or their entrance fee into a continuing care retirement community (CCRC). The loans will run at an interest rate of either prime +1.99% or +2.99%, with a one-time origination fee of 1.99% for CCRCs and 2.99% for senior living loans with the best credit profiles.
Those terms are more favorable than what other specialty finance companies tend to offer older adults, Papasavvas added. The company is also federally licensed, with consistent rates and terms nationwide — another leg up over specialty finance firms, which “must get state-to-state licenses and deal with sometimes vastly different regulatory requirements between states,” he said.
And unlike many other traditional financing providers, Papasavvas possesses an inside knowledge of the senior living industry thanks to his long involvement in the sector, including as a former vice president of finance for Artis Senior Living.
“What we’re bringing to the table for operators is an understanding financing partner that can immediately move with your customer, finance their move and give them breathing room and time to sell their home,” Papasavvas said.
Second Act’s second act
Second Act originally planned to open as a division of a Texas-based bank. But as storm clouds gathered and the prospect of a global pandemic loomed at the end of 2019, that bank decided to take a wait-and-see approach, and the two partners put the concept on hold.
“There were no hard feelings, and we both decided to step back,” Papasavvas said.
Not long after, Papasavvas was introduced to Dayton-based Liberty Savings Bank. The bank was a good fit for a variety of reasons, chief among them the fact that it has branches in Florida with many older adults as customers.
“They had been listening to their older clientele on the kinds of things they need,” Papasavvas said. “When they saw that we wanted to build the first retail bank — and the first online FinTech, essentially — for the 50+ demographic, it was really a match.”
So the two companies teamed up and struck a five-year agreement to offer loans through Liberty, with plans to spin Second Act off into its own online retail bank focused on the 50+ demographic after that period ends.
Second Act is not only aimed at helping older adults. The service can also work with senior living providers directly to lend money to prospective residents when needed, and thus drive new move-ins at a quicker pace, according to John Schwaner, Second Act’s chief growth officer
“There’s a lot of turnover in the industry for executive director and sales positions,” Schwaner told SHN. “That’s one of the points that are going to make us different: it’s not just a transaction, this is a partnership in helping optimize your census and revenue.”
Papasavvas, an avid football fan, believes that senior living is also a “game of inches.” He pointed out that it’s one thing to go from 80% occupancy to 92% or 93% — but going from there to 100% is a process of incremental gains.
“By presenting to [prospects] all the options and making it easy for them to transition, it becomes an easier sale,” Papasavvas said.
For an average assisted living provider with 50 buildings, just four new move-ins a year at each community could net millions of dollars in added net operating income (NOI) — money that providers could use for capital expenditures to keep up with competitors or to hire staff during a challenging labor market.
As of early July, Second Act had already provided two loans and signed up with dozens of senior living communities. The company was also in discussions with about 1,000 different senior living communities.
Within a year, Second Act plans to start offering bridge financing to active adult communities, and the firm is launching a money market CD savings account service for older adults at “higher yielding rates and your traditional bank branches,” Papasavvas said.
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