As awareness of senior housing as an essential investment asset class increases, it's critical for investors seeking to capitalize on the sector's long-term demographics and supply/demand trends to understand the operational complexities inherent to senior-housing operations.
The sector is a marriage of health-care, hospitality and real estate services operations. A typical 90-unit senior housing community employs up to 70 to 90 professionals and operates around the clock. Layer on a fragmented regulatory environment that varies state to state and the operating complexities increase. As a result, most of the existing investment opportunities going forward will be a result of dislocation caused by operational breakdowns. Therefore, operational expertise will be crucial to both underwriting and executing at the asset level.
Moreover, it is important, to align with operators that have the leadership, infrastructure and systems in place to foster a strong asset level culture to drive performance. In other words, operators need to be equally motivated to perform as owners.
As a result, some investment managers have formed their own operating platforms. Being an owner operator allows for the investment management team to maintain full control of their assets and showcase best practices across sales, employee training/retention, revenue analysis and property management.