With so much capital flooding the senior care space, lenders and investors need a better appreciation of what it is they are funding.
People like to say that the seniors housing and care industry is driven by demographics, but for the past few years it has been driven by cheap and abundant capital. But to buy it or build it “because I can,” while maybe rational in the moment, does not make long-term sense and usually leads to future problems.
So here is my recommendation. For every new lender or investor you have, ask them to do an 8-hour shift in one of your buildings, and I mean doing the dirty work, not just shadowing an employee.
First of all, they will have a new appreciation for how hard a “business” it really is, and an appreciation of the work you do. Second, they will wonder why your hourly workers do what they do for such a relatively low wage. Third, when you complain about cost increases, they will be more understanding, especially on the labor front.
Too many investors are too far removed from what they are actually investing in that they have lost sight of the fact that it is much more than demographics and cap rates. And not enough of them are looking at the model to see if it will still be relevant in 2030, when the oldest boomers are 84 years young. And what happens if it is not relevant? Think about it.
Great advice.
The other area you should have your investor look at is how you are managing your spend across all vendors. Hopefully you have a system or 2 in place that manages all your procurable items, as well as one which assists you in the management of all non-procurable items. If not, you may want to hold off on showing them what type of operator you are until you do. But when you do, this should be a flagship you wave as it will truly differentiate you as a cost efficient and effective operator.