So far this year, acquisitions in senior housing are proceeding at a rapid pace, further demonstrating the attractiveness of these assets. In addition to purchasing senior housing properties, a growing number of providers are beginning to renovate properties in an effort to boost occupancy, increase their net operating income, and add value to their investments.
A Prominent Healthcare REIT Launches its Redevelopment Strategy
In the past few months, the healthcare real estate investment trust Ventas Inc. has gone on an acquisitions tear. During this period, Ventas entered into agreements to purchase $3.8 billion in healthcare assets, including a $2.6 billion purchase of the health care REIT American Realty Capital Healthcare Trust. Ventas is now supplementing its strategy of growth through acquisitions by redeveloping properties. During the second quarter of 2014, Ventas had nine properties in redevelopment, significantly more than the two properties in redevelopment during the second quarter of 2013. Ventas currently has over $115 million invested in renovation projects and, according to its president Ray Lewis, “These investments represent an excellent risk-adjusted return, and we expect them to enhance our growth rates as they come online.”
Ventas’ renovation projects can cost as little as $1 million or more than $20 million, and often include a range improvements, from upgrading a facility’s common areas, to upgrading an entire wing of a building, to adding new units to a building. For example, Ventas sometimes adds memory care units to its buildings in order to admit more residents with higher acuity needs. The renovations ultimately depend on the property market and the opportunities Ventas sees in the region.
A Wisconsin Community Launches its Redevelopment Strategy
One example where senior housing provider is implementing a redevelopment strategy to boost its value is in Menasha, Wisconsin, where the retirement and assisted living community Touchmark on West Prospect just completed a large expansion and renovation project for nearly $10 million. Similar to the strategy that Ventas sometimes employs, Touchmark’s expansion consisted of adding a new addition with memory care units to the property in order to accept more higher acuity residents. The new addition is a one-story building divided into three areas. Two of these areas are devoted to memory care residents, with the third geared toward higher acuity assisted living residents. Each area or neighborhood has its own kitchen, living room, and dining areas, as well as a courtyard, spa bath, hair salon and family meeting room to share among the residents. Touchmark did not stop there, however, as it also redeveloped its main building by adding new furnishings, carpeting, paint, flooring, lighting, guardrails, dining rooms, and a fitness room. Touchmark’s management is pleased with how the project turned out, and believes it will help the community to better attract, keep, and care for new residents.
Renovations are likely to increase as the senior housing market continues to grow, as providers look to differentiate themselves in an effort to boost occupancy and add value. Industry participants seeking to take advantage of the market’s strong dynamics by acquiring properties in redevelopment should contact the Chicago-based financing firm Cambridge Realty Capital. They can help you learn more about the many different options offered for a wide range of senior housing transactions.