Hotel Conversion to Assisted Living Facility Review

19 Replies

We are looking to convert a 60 unit hotel to assisted living and so far it looks like this property will work.  The only concern is that it is between 3 cities (Albertville, Monticello, Otsego, MN) about 5-10 minutes between each in a Suburban area of the Minneapolis metro.  The area is growing and housing developments are going up, but this hotel is definitely not "in-town".  It is on 33 acres and has a lot of features that make it attractive for assisted living including views of the Mississippi river valley, 33 acres of land with walking path, indoor pool, beautiful flower beds and landscaping.  It's a very beautiful, natural setting with deer, turkeys, birds, and butterflies on the property.    With all of that said, our concern is that it is not in a town.  Is that a deal killer for assisted living?  I'd appreciate any insights you may have.

http://www.loopnet.com/Listing/19761224/10990-95th...

Regards,

-Jaden

I don't know that being "in town" would be the deal killer. However; how close is the nearest hospital, fire station, etc. for emergencies? How close would doctors offices be? Would the assisted living be for people that are mobile or bed ridden? Would you provide transportation? 

I think it looks like a great property, and idea. Good luck to you.

I'm not anyone with experience in developing assisted living, but have considered it for a property I own though I'd be interested more in those for independent living, not assisted living. 

@Karen Margrave

Thanks for the input.  I think this property offers a lot of features that an in-town location cannot. The hospital is a 9 minute drive.  Nearest fire station appears to be 7 minutes away at normal speeds. We would provide a shuttle service to get people to church, doctor appointments, etc.

-Jaden 

Take a look at bathrooms to make sure you can convert them to ADA accessible.  I am not familiar with assisted living design and I may be getting this confused with a nursing home.  I would think you would want all the bathrooms to be ADA compliant and not just some as typically found in hotel design.  This may require a lot of renovation.

@Jaden Ghylin Sounds like an exciting project to me! Those distances to medical and emergency response are great. Check with Planning, etc. as far as zoning allowing it, and what is required. Obviously I'm in California where the simplest things can become a nightmare, but in your area it's probably much simpler. if you decide to do it, please post it on Investor Deal Diaries, I definitely want to follow along! 

I do commercial financing and from a underwriting POV it may be a little trickier to secure financing. If i were working on financing this deal my first move would to be putting together a marketing package with well written details on how you plan to occupy this property, BEFORE submitting to any lenders. 

Jaden

DO THE DEAL!

Those distances to reliable medical, fire station and city are exactly the right formula.

I love those kind of deals and senior care facilities are a solid money maker to the right investor or corp that looks for those dwellings to purchase.

Good for you on thinking outside the box and making a big effort on putting those type deals together.

@Vernon Miller

Thanks for the encouragement.  I've talked to some assisted living operators locally and they agree.  We are in the process of getting a feasibility study done to prove this out.  Everything I've seen indicates that this should be a winner.

-Jaden

Awesome times for strategic RE investing.

You will be a winner.

"All a person has to do is ask and sometimes that is the hardest thing to do."

A great quote from a friend of mine, Ron Bunner

Looks like that will be a great adventure and helping those in need of senior care living.

Great job..

Latest update: We've got a proven operator (http://www.oxfordmgmt.com/senior-living-properties/) lined up to run this place and help direct the conversion. They will manage the architect, builder, designer, etc and will put together the marketing, sales, and leasing teams. They currently manage 13 facilities in MN and most of them are conversions rather than new builds. The operator is very excited about the building, the land, and the location and believes that it will be very good at attracting tenants due to the natural beauty. The demand study looks strong. We used Maxfield Research for the demand study. Proforma was done by an owner of a 90 unit assisted living building in a nearby suburb and it shows a 20% cap rate when the facility is 94% occupied based on the final project of $5mln. Things are looking good and falling into place. Next steps, talk to city about zoning, building codes, and sewer hookup, contract architect and interior designer, complete full market study, bring operator under contract, and raise some equity!

Stay tuned....

-Jaden

The operator is excited about the location of this facility because it's at the intersection of 2 county roads with good traffic, but it's set back on 33 acres in a very quiet, peaceful setting. The landscaping, ponds, and flowerbeds are beautiful and the lot backs up the Mississippi River with great views of the valley. There are walking trails, gardens, wildlife, and a pool. Most assisted living facilities don't offer any of these amenities. We are also investigating the potential for having a couple of horses on site for therapeutic purposes as horse therapy has been shown to help with Alzheimer's and healing in general and of course people love horses. The possibilities are exciting!

-Jaden

I would love to hear how this turns out! My background includes business management for AL & Memory Care in the same area 😉 I was with Tealwood for a couple of years and they have a facility in St. Michael and Princeton. Good luck!!

This is an area of real estate development that is outside of, and beyond, the scope of my expertise; but I would like to express my best wishes for a successful venture and my admiration for your entrpernueral spirit.

I worked in AL acquisitions a couple years ago, This looks promising, make sure to secret shop all the comps within a 10 mile radius. Look for occupancy, rates, new tenant concessions. If there are wait list, that is a great sign. Know going in if you are operating a private pay or will you accept government assistance. Make sure Oxford does not have any pending lawsuits.  The operator and market research are the keys to success hear. Is the area's 40-50 year population growing an are they affluent. Can the kids of the elders afford it? How are you financing? I would have Oxford's principals buy a some equity.  Make sure you have enough dry powder to get it stabilized. 

If everything goes smooth this could be a home run. I look forward to reading more!

@William Kyle Walker

Thanks for the feedback. The initial proforma looks very good, stabilized NOI is about 20% of final investment amount. I have already shopped all of the competing facilities, most are full with a waitlist. There are a couple with openings, but they are higher priced. We are targeting mainly private pay with approximately 15% public assistance.

Good point about lawsuits, I will check that.  The market demand study shows a large population in the 50-65 age range and growing about 20% in the next 5 years.  Median household income of that age bracket is $100-120k.  

I am still working on the financing.  I have a bank that I've worked with in the past that is interested, we are still working through it.  

Good tip on Oxford buying equity.  I ran that idea past them and they responded that they don't invest in the facilities, only the management business.  

You are right on about the dry powder.  That is what I'm working on now.  Need to raise the proper amount of equity and financing to carry the soft costs until break-even.

Thanks for your input!

-Jaden