Our Investment Philosophy can be separated into three components: our Acquisition Criteria, Operator Philosophy, and Asset Management Strategy.
We create value by buying communities that fit our Acquisition Criteria, installing operators who align with our Operator Philosophy, and applying our Asset Management Strategy to deliver support and oversight throughout the investment cycle.
Acquisition Criteria:
- Substantial discount to replacement cost.
- Large enough to attract institutional buyers in the future – ideally greater than 100 units. Our communities currently range in size from 102 – 129 units.
- Quality unit mix and sufficient common areas to ensure community has local staying power. Communities with limited common areas and excessive quantities of small studios (<250 sq ft) have a higher risk of functional obsolescence. This typically rules out assets built prior to 1990, with limited exceptions for heavily renovated buildings and/or irreplaceable real estate in infill locations. Our existing assets range in vintage from 2000 to 2019.
- Operational underperformance or nonperformance, often due to failures of a large, overextended operator.
- No, or in certain cases, limited, new senior housing development underway within the community’s surrounding area.
- Market has a growing overall population and aged 75+ population.
Operator Philosophy:
Senior housing is a complex operating business. Local relationships are critical for sales and marketing, regulations vary by state, and expenses creep without close supervision. Investment returns depend on making residents comfortable and providing exceptional care. Residents have options, and our communities need to be their top choice.
For these reasons, communities with high-touch local management consistently perform better than those under large national operators. Local operators better understand community culture and connect more deeply with residents and staff.
We do not self-operate because it’s not our core competency, and we do not partner with large fee-for-service operators. We partner with operators who:
- Are eager to co-invest, taking risk alongside us and aligning their incentives with ours;
- Are physically located near the communities they manage for us;
- Have strong track records;
- Are entrepreneurial and founder-led – we communicate directly with owners, not middle-managers;
- Are regionally focused and selective about new business.
Our Operator Philosophy has thus far delivered good outcomes, and we intend to stick with it for the foreseeable future. We may eventually decide that developing an internal operating platform for pieces of our portfolio is worthwhile because it gives us additional control. We may apply the same logic and acquire an existing operator. We may choose never to self-operate, and to grow with a handful of programmatic operating partners instead.
Asset Management Strategy:
We view our operators as partners, not service providers. We constantly communicate with them, offer suggestions, and learn from them. They view us as a resource and sounding board. Our approach towards operating partnerships includes:
- Collaborative underwriting and deal analysis. We make acquisition decisions alongside operators, and we don’t commit to deals unless we’ve identified an operator who understands the building’s problems and is enthusiastic about the opportunity.
- Constant communication and availability. We frequently talk to our operators about sales and marketing efforts, staffing decisions, capital expenditures, and everything in between.
- Introductions and networking. We connect our operators with each other, and with other industry friends, to facilitate idea-sharing and expand their networks.
We believe active ownership accelerates stabilization timelines. Passive owners leave operators feeling unsupported and unscrutinized, which leads to slower change. We’re hands-on owners who treat our operators as partners while also acknowledging their expertise and our own limitations. Our goal is to keep attention on our buildings and help solve problems, not micromanage.
