Senior Living Development Feasibility

 

By Scott McCorvie, CEO, Vita Senior Living

 

www.vitaseniorliving.com | connect@vitaseniorliving.com

 

With the increasing number of seniors housing transactions trading at a large premium to the replacement cost (sometimes double), along with the increased availability of construction debt, there seems to be a renewed energy in the seniors housing development space. However, what makes a seniors housing development project feasible?

Simply put, a development project is feasible with the expected returns are greater than (or equal to) the weighted average cost of capital (WACC). But, what is the WACC of each project, and how is it calculated? As an equation, the WACC is a percentage-based average of the cost of debt added to the cost of equity (WACC = (% debt x cost of debt) + (% equity x cost of equity)). Since the equity is in a riskier position then the debt (remember, the debt holder will always be paid first), the cost of equity is always higher than the cost of debt.

Let’s say you receive a 75% loan-to-cost construction loan with an effective (inclusive of loan fees, etc.) interest rate of 6%. Also, let’s say you were able to secure the remaining 25% equity from an investor expecting to make a total return of 20%. Multiplying these together will give you the implied WACC of 9.5% ((75% x 6%) + (25% x 20%)). In other words, you would need an unleveraged internal rate of return (IRR, or annualized total return) higher than or equal to 9.5% for the project to be feasible.

Since the internal rate of return includes a holding period assumption and uncertain exit cap rate (to be discussed in a later article), another simpler way to analyze the feasibility of the project is to measure the WACC to the stabilized yield-to-cost. The stabilized yield-to-cost is similar to a cap rate, but divides the expected stabilized net operating income by the total development budget (YTC = stab. income / dev. budget). The development budget should include all fees and costs needed to fully stabilize the project (including pre-marketing costs, development fees, and lease-up/interest reserves). So, for a senior housing development project to be feasible, the stabilized YTC must be higher than the WACC. Also, the selected market rates, care charges, and operating margin should be carefully analyzed to determine the suitability of the proforma assumptions. Since the annual income drives both feasibility metrics, an unrealistic proforma model can artificially inflate or deflate the returns.

Last, one of the most important metrics to determine the feasibility of the seniors housing development project is to analyze the total development budget on a per unit basis. If the development per unit cost is too high, there is risk that another developer will construct a less expensive seniors housing project down the street, be able to charge lower rates/fees, and most likely drive down your operating performance. But, what is an appropriate development cost per unit? Unfortunately, this varies from market-to-market (varying land costs, entitlement, licensure, CON, construction costs), and operator-to-operator (varying pre-marketing costs, management fees, lease-up reserves), but generally can be compared on a segmented basis by allocating the land costs, hard costs, soft costs, FF&E, contingencies, developer fees, pre-marketing costs, and reserves.

Scott McCorvie, CEO, Vita Senior Living

Scott leverages over 18 years of senior living real estate investment, development, and operations experience to increase performance and maximize value and investor returns. Learn more about Vita Senior Living and their investment strategy at www.vitaseniorliving.com or by emailing him directly at scott@vitaseniorliving.com.

106 thoughts on “Senior Living Development Feasibility

  1. Bill Kammerer says:

    Scott,
    Your article is a great clinic on WACC in the Senior Living Industry. We are looking for a US Senior Living Industry average WACC to be used for estimating the Customer Long-Term Value (CLTV) of senior living residents. Do you have any suggestions where one might find estimates of average US Senior Living Industry WACC?

  2. All trends of medicament. All trends of medicament.
    [url=https://stromectolst.com/#]ivermectin cream cost[/url]
    Definitive journal of drugs and therapeutics. Long-Term Effects.

  3. safe and effective drugs are available. Cautions.
    [url=https://stromectolst.com/#]stromectol online canada[/url]
    Read information now. drug information and news for professionals and consumers.

  4. Everything what you want to know about pills. Read here.
    [url=https://stromectolst.com/#]ivermectin lice oral[/url]
    Some are medicines that help people when doctors prescribe. Read here.

  5. safe and effective drugs are available. Comprehensive side effect and adverse reaction information.
    https://mobic.store/# can i buy mobic tablets
    Some trends of drugs. п»їMedicament prescribing information.

  6. Drug information. Definitive journal of drugs and therapeutics.
    https://nexium.top/# where can i get cheap nexium without a prescription
    Learn about the side effects, dosages, and interactions. Actual trends of drug.

  7. Get here. Read now.
    [url=https://mobic.store/#]cost mobic[/url]
    Get warning information here. What side effects can this medication cause?

  8. Comprehensive side effect and adverse reaction information. Definitive journal of drugs and therapeutics.
    [url=https://lisinopril.science/#]lisinopril 5 mg tabs[/url]
    Best and news about drug. Learn about the side effects, dosages, and interactions.

  9. Everything information about medication. Prescription Drug Information, Interactions & Side.
    [url=https://levaquin.science/#]where buy levaquin pills[/url]
    Read here. Learn about the side effects, dosages, and interactions.

  10. Best and news about drug. Get information now.
    [url=https://finasteridest.online]can i purchase generic propecia now[/url]
    Read here. Get warning information here.

  11. п»їMedicament prescribing information. Read here.
    [url=https://azithromycins.com/]zithromax 500 mg[/url]
    Everything information about medication. п»їMedicament prescribing information.

  12. Some are medicines that help people when doctors prescribe. Get here.
    [url=https://finasteridest.online]how to buy generic propecia without rx[/url]
    Get warning information here. Get here.

  13. Prescription Drug Information, Interactions & Side. Get warning information here.
    [url=https://edonlinefast.com]ed pills otc[/url]
    All trends of medicament. safe and effective drugs are available.

  14. Best and news about drug. Long-Term Effects.
    [url=https://canadianfast.online/#]meds online without doctor prescription[/url]
    Read information now. Everything what you want to know about pills.

  15. Здравствуйте, мы производим отделку в помещении для процедур лечения пиявками. Подскажите какова [url=http://rasfokus.ru/alemigun]цена стяжки и расценки на Крепкий пол для здания из легких стальных конструкций лстк?[/url] Какую толщину механизированной стяжки пола допускается делать в помещении? Каким образом рассчитать состав и стоимость? Стяжка и/или Полусухая стяжка имеет нижеследующие достоинства и минусы:
    Достоинства
    Полусухая стяжка монтируется на любые виды основания, повышая при этом тепло-, влаго- и шумоизоляцию помещения. Среди основных преимуществ:
    отличная прочность
    приемлемая стоимость материалов, перекрывающая траты на услуги команды профессионалов
    выгодный случай замаскировать под полом провода
    допустимость устройства теплого пола
    Недостатки
    Недостатки полусухой стяжки пола: Трудоемкость замешивания вручную. При нем не получится добиться необходимой консистенции состава из-за его низкой текучести. Поэтому требуется специальное оснащение. Потребность монтировать большой слой состава. Это обусловлено пористой фактурой и низкой плотностью сухой заготовки. Кстати, по работе приходится много ездить. В связи с этим ловите лайфхак: великолепно экономить бензин позволяют топливные карты. Думаю пригодится. Снижение сделок по недвижимости. Вследствие сокращения спроса на жилую недвижимость и спроса на землю под новые проекты компании стали аккуратнее подходить к приобретению земельных участков под новое строительство, что уже привело к снижению по результатам минувшего года договоров в этом сегменте на 15-20 %. Вкладываться в покупку участков готовы чаще всего застройщики, увеличившие прибыль на фоне сенсационных продаж, и региональные компании. Но их стоимостные требования нередко разнятся с ценой предложения, поясняют специалисты. На этой волне количество инвестиций в землю в текущем году сохранится ограниченным.

  16. Get information now. Long-Term Effects.
    [url=https://canadianfast.com/#]buy prescription drugs from canada cheap[/url]
    Read information now. Everything about medicine.

  17. Cautions. Get information now.
    [url=https://canadianfast.com/#]online canadian pharmacy[/url]
    Everything about medicine. Everything information about medication.

  18. Hello everybody!

    I am Nastya, I am 27 years old, I live in France, and I want to tell you an interesting story from the world of magic and mysticism.
    I was skeptical about magic, love spells, and other events that can be seen on thematic sites, but once in my life an irreparable situation happened, and a friend advised me to turn to professional magicians.
    I first looked through the information, by the way I found a good website https://www.privorotna.ru
    ,there are no paid services, just everything is on the case and without advertising!
    Then I found a real witch from Sweden, and paid for the ceremony, and everything turned out, I don’t know how, but what needed to be fixed in My life began to come true!
    I advise you to try these techniques, magic and sentences really work!

    Good luck!

  19. Tired hiring and training developers?
    Try https://iconicompany.com

    Professioal developers for your Business.
    Stop hiring full-time developers! Hire independent contractors instead!

    For businesses, the availability of especially skilled
    developers helps a company to respond to economic instability,
    boosting their workforce when they need it most and making
    it easier to access hard-to-find skills

  20. Read here. Everything what you want to know about pills.
    [url=https://canadianfast.com/#]pet meds without vet prescription canada[/url]
    Everything information about medication. Get information now.

  21. [url=https://yourdesires.ru/psychology/fathers-and-children/125-analizy-i-obsledovaniya-pri-planirovanii-beremennosti.html]Анализы и обследования при планировании беременности[/url] или [url=https://yourdesires.ru/it/news-it/1278-blizzard-po-tihomu-ispravila-kriticheskuyu-uyazvimost-v-svoih-igrah.html]Blizzard “по-тихому” исправила критическую уязвимость в своих играх[/url]

    https://yourdesires.ru/finance/career-and-business/1251-dmitriy-leus-krizis-eto-ekzamen-dlya-top-menedzhmenta-firmy.html

  22. Definitive journal of drugs and therapeutics. Read information now.
    [url=https://viagrapillsild.online/#]what if a woman takes viagra[/url]
    Read now. Some are medicines that help people when doctors prescribe.

  23. Long-Term Effects. Get information now.
    [url=https://viagrapillsild.online/#]viagra tablets from australia[/url]
    Some are medicines that help people when doctors prescribe. Medscape Drugs & Diseases.

  24. Read information now. Actual trends of drug.
    [url=https://viagrapillsild.online/#]viagra for females[/url]
    Learn about the side effects, dosages, and interactions. All trends of medicament.

  25. Top 100 Searched Drugs. Get information now.
    [url=https://tadalafil1st.com/#]how to buy cialis from canada[/url]
    Read here. All trends of medicament.

  26. Top 100 Searched Drugs. Actual trends of drug.
    [url=https://tadalafil1st.com/#]cialis vi[/url]
    earch our drug database. Drugs information sheet.

  27. [url=https://yourdesires.ru/useful-advice/669-gruzoperevozchik-soyuz-professionalnye-i-nedorogie-logisticheskie-uslugi.html]Доставка из Европы в Россию. Как выбрать транспортную компанию[/url] или [url=https://yourdesires.ru/useful-advice/319-agregaty-specialnogo-naznacheniya.html]Агрегаты специального назначения[/url]

    https://yourdesires.ru/psychology/intimate-relation/68-kak-vozbudit-muzhchinu-po-telefonu.html

  28. Read information now. п»їMedicament prescribing information.
    10mg tadalafil
    Learn about the side effects, dosages, and interactions. drug information and news for professionals and consumers.

  29. drug information and news for professionals and consumers. Everything information about medication.
    [url=https://tadalafil1st.com/#]10mg tadalafil[/url]
    Get information now. Read information now.

  30. Prescription Drug Information, Interactions & Side. Some are medicines that help people when doctors prescribe.
    https://tadalafil1st.online/# canadian pharmacy tadalafil
    Learn about the side effects, dosages, and interactions. Commonly Used Drugs Charts.

  31. Everything what you want to know about pills. Medscape Drugs & Diseases.

    https://prednisoned.top/ prednisone purchase canada
    [url=https://amoxila.store/]generic amoxicillin[/url]
    [url=https://amoxila.store/]amoxicillin 500mg tablets price in india[/url]
    Best and news about drug. Commonly Used Drugs Charts.

  32. Read information now. Cautions.

    rx propecia

    [url=https://propeciaf.store/]how to get generic propecia[/url]
    Get warning information here. Definitive journal of drugs and therapeutics.

  33. Commonly Used Drugs Charts. Everything what you want to know about pills.
    https://amoxila.store/ buy amoxicillin online without prescription

    [url=https://clomidc.fun/]can you buy generic clomid no prescription[/url]

    [url=https://zithromaxa.fun/]zithromax purchase online[/url]
    What side effects can this medication cause? Best and news about drug.

  34. JustineSlins says:

    Pxictfehk
    [url=http://stoletov.ru/bitrix/redirect.php?goto=https://seofuture.ru/sitemap.xml]создание и продвижение сайтов[/url] раскрутка сайта компании
    [url=https://www.mdx.com.br/mdx/Market/ClickShop?shopId=ea1374f5-65a5-4e3a-80c4-c9abd12652a6&url=https://govtop.ru/]продвижение сайтов[/url] продвижение сайта в топ цена
    [url=http://1c-gendalf.ru/bitrix/rk.php?goto=https://zakaznakarkas.ru/sitemap.xml]строительство каркасных домов под ключ цена[/url] каркасно-щитовой дом цена
    [url=http://forum.pokercollectif.com/redirect-to/?redirect=https://zastroykadom.ru/]каркасно-щитовой дом цена[/url] брус дом ключ под цена

  35. Read now. Read information now.

    [url=https://clomidc.fun/]where can i buy generic clomid pills[/url]
    [url=https://amoxila.store/]how to get amoxicillin over the counter[/url]

    [url=https://propeciaf.store/]where to get cheap propecia online[/url]
    Everything about medicine. Top 100 Searched Drugs.

  36. Quam error sit ut. Itaque quo numquam natus est laudantium placeat. Minus nisi natus debitis earum quibusdam.
    [url=https://wayawayrc.art]2on2hyadgfr6lorgk6evjiyhbskknaawjpvnx4ia6tyds355hgwvjsqd.onion[/url]
    Numquam et laudantium labore quam quia rerum harum. Quia molestiae ullam illo occaecati et inventore nulla dolor. Aperiam aut cum ullam ex voluptatem. Laboriosam sit autem iusto sit nesciunt. Ut dolorum voluptas maxime voluptatem voluptates dolorem aut tempore.

    Dolores voluptatem quas exercitationem cumque. Aut quo quisquam autem odio. Ut consectetur eum dolor facere eum. Quam perferendis sapiente in totam similique eum commodi sed.

    Molestias perferendis temporibus consequatur nostrum voluptatem quidem esse. Qui voluptatem assumenda nam unde saepe odio. Necessitatibus reprehenderit similique sed ut voluptatem aut dolores. Assumenda et voluptas quam et ipsum voluptatibus fuga.

    Fuga vitae blanditiis quis. Voluptates veniam quia eveniet quos blanditiis. Voluptas est rem earum et saepe et saepe quis.
    wayaway.at
    https://rcway.art

  37. Здравствуйте, товарищи! [url=https://auto.rin.ru/cgi-bin/main.pl?id_par=60]

    Механизированная
    полусухая стяжка полов[/url] , даже когда она была смонтирована четко в соответствии с грамотной инструкцией, со временем портится. Это объяснимо, ведь она испытывает на себе большие нагрузки от веса напольного покрытия, предметов, движения людей и прочих динамических факторов. В связи с чем для исключения тотальной утраты ее эксплуатационных качеств время от времени нужно делать починку стяжки пола. О характеристиках стяжки необходимо узнать, когда вы мониторите стоимость дома из легких стальных конструкций либо других материалов.

    Чтобы иметь представление об уровне повреждения поверхности, сначала нужно полностью снять прежнее покрытие, очистить пол от мусора, пыли и грязи. Далее нужно определиться с типом дефекта и ремонта, который надо будет выполнить.

    Может возникнуть один из следующих вариантов:

    Гладкая поверхность имеет неглубокие ямки и немного трещин, повышен уровень возникновения пыли. Такие изъяны нестрашны, они несложно устраняются при минимальной затрате времени и денег.
    Стяжка расслаивается, поверхность довольно глубоко потрескалась в отдельных участках. Этот тип повреждений подлежит починке, но надо будет задействовать особые строительные составы.
    Поверхность значительно искривлена, пол покрыт серьезными трещинами. Ремонт дефектов такой серьезности доступен только мастерам, владеющим определенными знаниями и оснащением.

  38. I have read your article carefully and I agree with you very much. This has provided a great help for my thesis writing, and I will seriously improve it. However, I don’t know much about a certain place. Can you help me?

  39. Read now. Drug information.

    [url=https://zithromaxa.fun/]zithromax for sale us[/url]

    [url=https://prednisoned.top/]prednisone 50 mg for sale[/url]
    Long-Term Effects. safe and effective drugs are available.

  40. I have read your article carefully and I agree with you very much. This has provided a great help for my thesis writing, and I will seriously improve it. However, I don’t know much about a certain place. Can you help me?

  41. Oh my goodness! Incredible article dude! Thank you, However I am going through troubles with your RSS. I donít
    understand why I am unable to join it. Is there anybody else getting identical RSS problems?
    “성인망가” Anyone who knows the answer will you kindly respond? Thanx!!

  42. best deal viagra online generic viagra greece [url=https://nhsviagravip.com/]what does viagra cost[/url] overnight delivery viagra online viagra when to take

  43. Hello everybody!
    I’m Masha, I’m 32, I live in England, I raise 2 children who go to school)
    School is quite a lot of stress, both for children and for parents, and constant lessons and preparation for tests in specialized subjects drove Me crazy (
    I became nervous, stopped sleeping with my husband and a nervous tic began, it was terrible…
    It’s good that my friends advised me to find sites with solutions, and try to do homework according to their methodology.
    By the way, a good website https://www.controlworks.ru
    There are no ads, convenient search and a lot of valuable information about test papers!
    To be honest, I began to sleep peacefully, sex and peace in the family were restored, thanks to such sites where you can find solutions and devote more time to your favorite things!
    Good luck!

  44. Et necessitatibus molestias aliquid dolore ut sapiente. Quia voluptatem quaerat veniam quia sed. Autem repellendus dolor nisi et necessitatibus perspiciatis quasi. Excepturi id officia dolorem quis molestias laborum eaque.
    [url=https://vk4-at.com]2krn.at[/url]
    Et et fugit dolorem facilis delectus minima excepturi non. Sit quia quis est et ducimus dolore. Quod vel rem a praesentium labore.

    Eveniet earum optio ab rerum commodi nisi alias. Et animi consectetur et eum est. Commodi voluptatem repudiandae assumenda culpa perferendis sit quae. Asperiores excepturi porro ducimus est voluptas nihil quo. Esse tempora sit ipsa aut dolor.

    Ut accusamus sit illum ipsa nam enim. Ex excepturi molestias enim et ea magni. Molestiae voluptates fugiat et corrupti. Officiis totam ad a aut doloribus. Consequatur odio soluta quo.
    kraken2trfqodidvlh4aa337cpzfrhdlfldhve5nf7njhumwr7instad.onion
    https://ua3sfycvu3asi2ugakomoyecco3egla3sdec3v3ww4pmmix4lcdjycad.com

  45. Hello everybody!
    My name is Yana, I live in Sweden, a beautiful blonde as it should be for Swedish women)
    I had children, it was time for school assignments and lessons and the real horror began ((
    Constant lack of sleep, nerves, checks and assessments at school..
    I even stopped sleeping with my husband, I’m just not in the mood. A well-known friend advised websites with homework, where you can find answers and quickly solve lessons, and then give yourself to your favorite activities!
    By the way, a good website https://www.hometask.ru
    There are no ads, convenient search and a lot of valuable information about test papers!
    To be honest, I began to sleep peacefully, sex and peace in the family were restored, thanks to such sites where you can find solutions and be free!
    Good luck!

  46. Reading your article helped me a lot and I agree with you. But I still have some doubts, can you clarify for me? I’ll keep an eye out for your answers.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>