Creating Value With A Turnaround in Senior Living

 

Let’s image a group of investors buy an underperforming assisted living community with 100 units that also offers memory care.  The census is at 84% and it performs in the bottom decile.  How much value will they create over 5 years if they move the performance up to the median level?

All of the numbers that follow are based on The State of Seniors Housing 2014, page 56. (Using other years results in very similar numbers.)

Leaseup 1

So there is very good news here if one can do this.   This example assumes the census does not change, but most likely it will change because in fixing the processes, delivering quality care and properly maintaining the building it is most likely the census will go up.   So assuming the census goes up to 92% we see further value added.

Leaseup 2

With all of the discussion about increasing census this may be a bit surprising that the value does not go up more.    It helps to increase the census, but the more fundamental things need to happen to drive the value.   (Stay tuned for future discussion about the cost structure.)

So when someone says they can double the value of a broken assisted living community in 5 years one can see that is realistic.

 

 

Creating Value With A Turnaround in Senior Living

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