The demographics are enticing, but is now really the best time for independent senior housing/healthcare owners to embark on a new construction project?
“The answer, of course, is that it all depends,” says Cambridge Realty Capital Companies Senior Vice President Brent Holman-Gomez.
“For many, new construction may appear to be the most intriguing option. But it may be advisable to first consider maximizing the potential of assets currently owned,” he suggests.
“A bird in hand may be worth two in the bush.”
Cambridge is one of the nation’s leading senior housing/healthcare lenders and acquires properties through its Cambridge Investment and Finance Co. business. The company’s principal investment strategy includes direct property acquisitions and joint ventures, sale/leasebacks and the acquisition of distressed debt.
At the company Mr. Holman-Gomez is responsible for originations, operations and asset management.
“When a property seems to be operating at its peak, owners may decide it’s time to start looking at new opportunities to make money. But unless the 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 present property.
“Compared to a new business venture, operating improvements to a current 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. More likely than not, focusing on a currently owned property will be more rewarding than taking on the unknown challenges of a new property,” he reasons.
Mr. Holman-Gomez says 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 business by retraining staff, marketing and making cosmetic improvements can be the map that leads to a pot of gold,” he said.