Hotel Conversion to Assisted Living

5 Replies

Converting a hotel or motel to Assisted Living or better yet to Alzheimer's Care Facility seems to be a much higher and better use for hotels these days. The NOI is far greater if you economically make the conversion. In my area it requires a Conditional Use Permit which is subject to a public hearing and also the local Building Dept gets into the act as well and can require the hotel be mofified for its' new use which can kill the deal if the modifications are too expensive. Has anyone ever done a successful conversion or have you found it possible to convert buildings other than hotels to Assisted Living without having to go through all this? :roll: :mrgreen: :D

You are absolutely correct that an assisted living facility best use thing.

In my experience which includes one 15 bed facility and failing to get several others through the permitting process is this...

1. Only own the building and let someone else run the facility. We did this with a modified NNN lease and had a cashflow screamer.

2. Many neighbors are hesitant about have a facility in their area. Work to overcome their objections

3. Some states/cities have very high barriers to entry. It comes down to how confident you are about getting the property through the process... and most lenders won't lend on project until the "process" is complete and most permits are in place.

Best of luck...

Not that hard, been there done that. Just get ahold of the state and start the licensing process, administrator etc., there is a demand, can't imagine neighbors objecting seniors over motel, hotel patrons., but then again, nothing surprises me these days. Good Luck. -- Dawn

:D :mrgreen: :lol: Thanks for your input. What it seems to come down to from the investor's (our) point of view is the best way to do one of these deals would be to write a letter of intent with the condition that the seller works with the investor to obtain a Conditional Use Permit before going to a hard contract. All of the other conditions, and terms of the deal can be covered so that it could close relatively quick and simply after and more importantly if the CUP can be obtained which also puts the eager seller in our corner to assist in all ways possible to obtain this. As an investor trying to obtain a CUP it is expensive (typical fees to planning dept are $5000-$7,000 out here in Southern California, but if you can obtain this the fire dept requirements are easy and straightforward to accomplish and the State will then have no issues in allowing the building to be licensed. Actually, I have no interest in being the operator as there are plenty of licensed operators who would like to expand. I just want to provide them the property on a long term triple net lease and let them run their business.. Thanks again for the input.

How about using an option to control the property while you work on getting the conditional use permit?

:D :D :D You could use an option to control the property although if the seller gives you an option they will usually expect some more serious nonrefundable consideration. I was thinking it may be more beneficial to make it part of the Letter of Intent as it would be essentially the buyer and seller working together to obtain the Conditional Use Permit and if you fail your deposit with the LOI is refundable although you as the buyer would be out of whatever fees you had to pay to try to obtain the CUP. The fees to the Planning Dept are not cheap but at least your consideration with the LOI would come back to you.

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