Developing a senior housing project

[Kevin C.]

Hello everyone. I hope this is the right forum. My colleagues and I are considering devolving a Senior Housing facility and we need some input on the managing side. Does anyone have any experience or know how to manage Senior Housing (or what to look for or what to expect or what profit may look like) - While we are highly interested in developing that project, we don’t know anything on managing or putting a management company in place for Senior Housing. Any help would be greatly appreciated. Taking consistent action, Kevin

[William Yeh]

@Kevin C. 

My group is also endeavoring to develop a senior housing deal from scratch. Regardless of the type of facility you are contemplating, there are two distinct pieces to the undertaking which you've described. 1) real estate development and 2) business operations.

If you intend to develop a piece of dirt from scratch, get ready for a long and turbulent ride. Development of any kind is fraught with challenges from day 1 ranging from feasibility (which is a big issue and to be addressed early on) to entitlements, financing, construction, and stabilization (roughly in that order). Get cozy with the city's planning department as you'll be working closely with them on entitlements. They need to both 1) like the use being proposed and 2) not deem the use incompatible with their adopted general plan among myriad other issues ranging from environmental to biological, etc. (scared yet?)

As others have already mentioned, senior housing with any level of service offered beyond that of a typical multifamily property is a business, not a turnkey investment. Your feasibility study and nothing else should dictate the programming and level of services offered. If your group has no experience operating such a business, I'd recommend seeking out multiple operators as others have suggested and heavily vet them. How many past projects have they taken part in? Have they only served as an operator or do they do any development work in addition? Do they typically have any skin in the game or only operate on a fee for service basis? Have their past investments met their pro forma expectations? Any pending litigation?

If all that looks good, make sure their interests are aligned with yours, namely with compensation in the form of equity, profit sharing, or some combination thereof. Given your presumed lack of experience in operating a senior care facility, the last thing you want is an operator that sees you as a low hanging contract that they can walk away from with minimal damage.

We're deep in the throes as well so this is merely a primer based on our experiences. Hope that helps.