Size isn’t all its cracked up to be, and it does matter whether you own or operate the real estate.
We always hear that size matters, but it can also work against you. While no one has claimed to be able to define the optimal size of a seniors housing company, I have yet to hear anyway say that they would be comfortable running a company with more than 500 properties. Most would say that 250 would be tops, with many of them even much smaller. I am talking about owning and operating, with the emphasis on operating. For REITs, I don’t know if there is a real number where their efficiencies get maxed out. They are not hiring the staff and serving the food. And they are not trying to create a company culture at the properties they own. That culture is company specific with each of the tenants. The American Seniors Housing Association recently came out with its ASHA 50 largest owners and managers. Once again, Brookdale Senior Living is the largest manager of senior living with over 1,100 properties, or triple the next largest. But when it comes to “ownership,” we have to disagree. They actually own “just” 424 of their properties, with about 700 leased or managed with no real estate ownership. So the Big Three REITs actually top Brookdale for owned properties, and we do expect them to get bigger. As for Brookdale, with some planned divestitures, they should become a little smaller, and more manageable.
