Assisted Living, New Construction

[Sasan Nemabakhsh]

Hello: 

I'm working on a new construction in Atlanta MSA for the end use of Assisted Living.  If you have experience in this arena, would appreciate your input. Some concepts are likely to be similar to multifamily/hospitality so if you also have experience with such new construction, feel free to add to the conversation. Thanks in advance. 

- For new construction, what is a reasonable construction cap rate?

- In terms of market due diligence, what is an optimal target population, what percentage of such demographic should be 50+(or if that needs to be of higher age), and what about net worth/income? **calculated based on 20 miles radius!?**

- With regards to occupancy, how many years does it take on average to stabilize the property? I have seen some new construction at 60s occupancy after a year. Also heard that it may take upto two years. your take? 

- Do you have a spreadsheet that you can share that would help with construction analysis?

- Have you worked with specific source of funding that would be of interest for commercial healthcare?

- What percentage of total revenues do third party operators typically charge? 

- Any third party operator/management company that you can recommend for this market?

- Any construction company to recommend with special expertise in this type of construction? 

Thanks in advance for your time and attention to details. 

[William Yeh]

@Sasan Nemabakhsh

My group is endeavoring to do something very similar to your project, albeit in a different market.

My advice is to get on the phone, have a drink, and meet with as many lenders, developers, operators, architects, etc as possible, asking them for referrals in the other trades you need and seeing what criteria they have for a successful deal. They will be able to answer your questions and help you get a clearer picture of what a successful deal looks like.

Assuming you need financing and you need a developer/operator in order to bring your deal together (which it sounds like), the people who occupy those key roles will make or break your deal and bringing a deal to the table that satisfies their requirements and that they view as a viable deal will greatly advance your learning as to what the critical factors are.

Every market will have different dynamics which will affect your build to cap and it will depend on your expectations as well as the expectations of your investors and lender given the market you're operating in.

As for stabilization, I typically see 18-24 months budgeted but a good operator can get it done in 12 with proper pre-marketing and solid market dynamics.

Get a feasibility study done before you close escrow if you've already targeted a specific parcel. Otherwise, I believe Nicmap is a good place to get general market intel to determine where there may be gaps in the market but it will cost you of course.

Cheers and hope that helps.