When it comes to maximizing investment returns and value in regards to senior housing development and construction, the focus remains on trying to extract value and capitalize on such investment vehicles. As one article has recently highlighted, there are a number of specific value added factors to consider when looking to senior housing development and construction.
“The seniors housing and health care acquisition market has been and continues to be dynamic, fed by interest rates remaining relatively low, declining capitalization rates, and a frothy lending environment [and] a significant portion of facilities being acquired are done so with the intention of realizing value upside through some degree of physical rehabilitation or repositioning.” In order to stay actively capitalized, it requires an immense amount of upfront strategy, including a continuing evaluation of various issues involved in the market. For investment and property managers, the changing real estate environment means that all variables must be considered.
In terms of the specific value added factors involved, there are identifiable elements that relate to all senior housing development and construction based projects, including: timing, logistics, execution risk, and financing options. One of the most significant issues fueling the increased interest related to senior housing development and construction is the historically low interest rates. Many large-scale senior housing and development projects have occurred largely as a result of taking advantage of the low interest rates. Logistically, the construction of many large-scale senior living housing projects is timed largely on the basis of historically low interest rates. Investors and developers are increasingly seeking to maximize value and in doing so, are evaluating the ongoing role of timing, logistics, execution risk, and financing options. The uncertainty involved in such long-term projects is largely based on if and when the Federal Reserve Bank will increase interest rates, and as such, the factors related to timing, logistics, execution risk, and financing options will largely be determined by such rates.
Senior Housing providers are at a pivotal moment in time. Cambridge Realty Capital is versed in a variety of investments in the senior housing market. Our experience and expertise make us a leader in the investment world.