Your senior care property seems to be operating at or near peak levels. Is a new construction project a good idea for your business at this time?
Maybe yes. Maybe no.
But senior housing property management and financial consultant Brent Holman-Gomez thinks senior housing/healthcare property owners looking for new opportunities to make money should probably first consider the potential of assets already owned.
Mr. Holman-Gomez is Senior Vice President for Originations, Operations and Asset Management at Cambridge Realty Capital Companies, one of the nation’s leading senior housing/healthcare lenders. The company’s principal investment strategy includes direct property acquisitions and joint ventures, sale/leasebacks and the acquisition of distressed debt through its Cambridge Investment and Finance Co. business unit.
“When a property is performing near its peak, it’s not uncommon for owners to start looking around for ways to build on current momentum. But before acting on anything it may be wise to first consider the old axiom that a bird in hand can be worth two in the bush,” he said, adding:
“Unless a property is at 100 percent occupancy and at the market’s highest rent level with a controlled expense ratio, the most profitability available is in the currently owned property. Compared with a new business venture, operating improvements to an existing facility are much more lucrative as they generally cost much less, possess solid upside potential and are a reinvestment in an existing business that lowers existing risk.
“Focusing on a currently owned property can be more rewarding than taking on the unknown challenges of a new property,” he suggests.
Mr. Holman-Gomez observes that any improvement in a senior housing business’ ability to produce a steady income will improve its value nearly tenfold based on property valuations per dollar of income.
“Empty units are potential goldmines of profitability. Adding some new excitement and energy to the things that seem mundane about your business can up the ante.
“Cosmetic improvements and a more focused marketing strategy can be the map that leads you to the pot of gold,” he said.