Senior Housing career path
I currently work for an investment manager doing senior housing asset management, with some exposure to multifamily as well.
I’m not sure I want to stay at my current company long term. I am concerned about exit opps given not all firms do senior housing. Should I be doubling down on senior housing and making myself an expert in that space, or trying to get exposure to other asset classes? What is your general outlook on senior housing?
I think either path is a fine one. Certainly, the senior space is highly nuanced and requires specialty skills to manage them and you've really got to know your stuff to manage them well. However, it is most certainly a declining/declined industry (depending on your seat on the bus) but it's obviously not going away. I certainly think some geographies are saturated but I don't think we ever got to the saturation level that people were warning about 5-7 years ago (at least in the parts of the southeast US that I monitor). That could mean it won't be attracting new talent so if you're younger and can develop that expertise; you could very well be in demand and command good value. I think the question is just how mobile do you want to be if you need/want to change shops and how entrepreneurial you are. There's always going to be folks cycling in and out of ownership during the assets life cycle and in certain areas; there's still real demand for new facilities as housing patterns change. I continue to see/hear of senior managers at successful properties going out and building/owning/operating new facilities with the intent to scale and sell to institutional managers after stabilization. They're not doing it at scale like LCCA used to, but there is still quite a bit of activity like that in one-offs that have been (surprisingly to me) quite successful.
Why do you say it’s a declining industry? Have that many senior housing assets been built that most areas are over saturated?
There was a bonanza of construction and new entrants into the space between the late aughts and 2020. Everyone was kind of expecting the Silver Tsunami to be this huge tailwind for the industry pretty much forever. It didn't quite work out that way and construction, sales, and refinancings kind of came to a sudden halt which was jarring to the industry and made folks kind of skittish. Lot of factors behind that dynamic but another component (as mentioned in other posts on this thread) is that some of those new entrants just expected it to be a cash cow because there was unlimited demand. And while that assumption about demand wasn't entirely wrong; you could have two facilities operating across the street from each other and one of them would be 100% occupied with a waiting list and the other was 60% occupied and couldn't give away their space (true story). Management makes the difference and it is not simply a story of 'if you build it, they will come.'
So, by "declining/declined" I mean that the industry is now in a period of consolidation and retrenchment where it is reacting to the situation above (getting weak actors out of the way) and to the natural change in demographics and lifestyle preferences that have evolved over the last 10 years (different generations aging into and out of the senior housing cohort who have different preferences about location [both local and regional] and financial situations).
Also can't ignore that COVID did have a statistically significant impact on occupancy numbers which are still being worked through.
I don't have any experience in this space, but from what little I've read the "Silver Tsunami" hasn't quite yielded the returns it was supposed to for Senior Housing. Correct me if I'm wrong here?
The above said, as a multifamily guy this is a space I'd like to get more exposure to. Even if the above is/was true, looking at demographic trends it seems a given there will be at least stability here for the foreseeable future compared to many other niches in RE... likely the ability to outperform. The projections for 65 and older share of US population are quite alarming tbh...
Again, no experience in this space but seems like a good place to be in moving forward.
My old shop was pretty aggressive in Senior Housing over the past few years, and people have some misconceptions about what business you're actually in. Yes there's a real estate component but you're really in the healthcare business. I think there's a positive story going forward but it may be one of the most difficult verticals to break into because of the nuances. Similar to hotel it's very consolidated. That being said at the right shop I think someone can really carve out a nice niche for themselves.
Can’t comment on how the industry as a whole is doing but I’ve got buddies at one of the senior housing reits and they’re printing money. Double digit % increases in NOI YoY.
I am all chips in on senior housing. Midas above brings up a good point about the oversupply that occurred during the last cycle ~2014-2019. During that period, new supply growth was absolutely bonkers, especially in suburban NFL cities in the southeast. I remember at one point, memory care construction versus inventory was approximately 25% in certain northern Atlanta burbs (Marietta, etc), meaning for every four units in existence, one was under construction.
However, the quadruple confluence of COVID, rising construction costs, rising cost of line labor, and lingering oversupply has driven current inventory growth back down to GFC levels and we have sustained 15 straight quarters of rapid net absorption with no signs of slowing.
To the popular criticism about the lackluster "silver tsunami," I think what most people got wrong was their timing. If you read NIC and ASHA research, you'll see that average age of a new resident in senior housing is early 80's, which is quite a bit higher than what most people expect. The baby boomers are just beginning to turn 79, so the tsunami is still waaaaay out in the ocean at this point. We have another couple years at least before it breaks on the shore.
Ultimately your call on where you want to take your career, but I don't think you need to worry about viability of senior housing, at least in the near or intermediate term.
First time, I’m mentioning my senior living experience on WSO, but I think it would be helpful for your thinking. Also a lesson on how to view your career in regards to timing/windows of opportunity, skillset leverage, and versatility. So, congrats, you made me “come out.”
I’m very glad I went into senior living over 15 years ago.
I first got interested in senior living in college (my values aligned and I love older people) and when I was an investment analyst for a large REPE I would pester the senior housing guys. I got my wish to work directly in the sector after Lehman collapsed (Sept 2008) and I became unemployed. It was difficult finding a job, but I saw this as an opportunity to get off the hamster wheel and create a unique career made for me. I found a 1099 job at a local senior living operator as their interim CFO (and eventually had my dad live in one of their assisted living communities; talk about being a team dad on a sports team, he was treated so well; lots of smiles and laughter). I would later go back into corporate, doing multifamily development from 2010-2016. From 2016 onwards, I co-founded companies in senior living and then other niche healthcare sectors. I’m almost fully divested and happy with the financial outcome.
We tried to raise a senior living acquisition fund in 2010. That would have been the right time, but we could not raise capital (notice the irony).
I found my “deal of the century” in 2012. That was the right time to buy, but equity was difficult to raise.
Post-2015, a lot of new entrants entered the industry. Multifamily developers, syndicators.
In 2016, my first company was ultra luxury, small senior living out of residential houses. I benefited from a rising residential home market and also a capital disconnect in that space (we were early entrants in the ultra luxury, built to suit).
Around 2018, the senior living industry started giving mandates to local and regional operators over the national operators. This provided an opportunity for smaller guys to grow. I benefited from that wave.
Around 2020 (even pre-COVID), there was distress and we were able to convert senior living buildings into other healthcare niche uses, and I was able to negotiate very favorable, multi decade net leases with PropCos. Win-win.
Post-COVID, new luxury CCRC’s in affluent markets in difficult to entitle areas have been doing great, at least the ones I’ve been involved with. The high end market allows for some margin (since it was compressed by recent hyper inflation). There’s also waves in other areas: government funded senior living for low income, and I bet other areas. And these waves will keep coming (another Opportunity Zone scenario under Trump?). But already I was becoming too jaded and fundamentally changed.
I am personally out of the game because I’ve become very risk adverse because of the near financial death experiences I’ve weathered through (I call these “20% outcomes”), and it’s mainly due to the risk adjusted return dynamic of personal real estate investing, the need to undergo intense partnership risk, and personal recourse for anything commercial RE (I did a HUD refi and that’s a rare case), again with partners for a long, long time. And being stuck in money losing assets.
So why a career in senior living?
Why you should: I have advocated on here to become an “asset intensive” professional rather than a real estate professional so that you have more versatility in your career. Senior living helps you think like an asset intensive professional, because of the higher emphasis on brand building (it’s also more fun) and allocation of resources during operations. In my Berkeley MBA pricing class, I remember this lesson the most: “consumers like to compare commodities, but have a harder time comparing when services are added on.” Senior living services/operations can make or break the price premium commanded by properties - therefore, you can also get asymmetric rewards as a good operator. The other thing is you can scale to some extent. If you get into other healthcare company building, you can look at real estate assets in an operating portfolio, with motherships, specialized buildings, and strong demand forecasting (sometimes with multi year revenue contracts). Not spec! Note, these are the most risky business to get into at the later stage. Also, you get experience managing and recruiting large workforces.
Why you shouldn’t: the industry is more mature and it’s harder to make money. It is harder to do what I experienced in the previous waves. New incumbents came up from that period and are now regional or national operators themselves. But there will be new waves and new offshoots, and a lot of older people who can’t take care of themselves or want and can afford independent living. But given how CRE in general has matured and the risk return deck favors higher resourced investors vs us small fry’s, this is a trend we all face. That said senior housing (or hotel, or other operationally intensive businesses) helps you think with more possibilities in mind.
Seniors have a lot more options these days: home health (a scalable business not constrained by “units”), staying in their home, live-in situations. But eventually almost everyone will need higher acuity assisted living or memory care. And, I fundamentally don’t believe anyone healthy who callously says “just kill me when I get like that” because most people want to keep living to see another day and life milestone - when that time comes. We are biologically, socially constructed to want to live as long as we can. There will be many more customers in the coming years. However, the industry is more mature and the windows of opportunity will be different.
Lastly, skillset leverage, which I talk about here. I was able to be the only person with Big 4 accounting experience, REPE, multifamily development, family caregiving experience for my father who had a stroke and dementia, and start up operating and scaling experience. I was rewarded well (equity, compensation, title) on a team of healthcare and sales entrepreneurs. The best thing that ever happened to me was being let go from my traditional, big brand name real estate job, and get away from “real estate.”
If anything, become an asset intensive professional in a field you are very interested in and be a small player waiting to catch the next set of waves. Be versatile. It took patience, and if you have the tiger by the tail you might not let go, but know you will be forever changed. If you are unemployed currently and can’t find a traditional RE job, you can do what I did in 2017 at age 35 (just two years post-MBA and three years into parenthood). I worked for 7 months at $15 per hour on the floor of a senior living facility near my house as an Activity Director. That experience set me apart and gave me a valuable perspective about Main Street, value of work, what happens during the day to day, and ultimately how we deliver value (making residents happy, making staff feel valued). Whatever industry that calls to you, that is asset intensive, and has a growing expanding market (could be Korean bbq restaurants, whatever), don’t be ashamed to work there for minimum wage and observe and plan. One day, it will all come together and it will be uniquely you.
Happy New Year!
[@odog808 @MemoryVideo.com] very interesting story, thank you!
what other real estate assets do you considered operating assets? Storage? RV and MHP?
Additionally, what are the medical adjacent sectors you were referring to, which were not traditional IL/MC/AL that you could work in if you get into senior housing operations?
What would I consider operating assets? Since I mentioned services, so my definition relates to more labor intensive sectors (full service resorts, amusement parks, casinos) or special sauce add-on (limited service hotels with convention business or breakfast; co-living; zero service hotels) or any strategic business with asset intensity (ie Chase bank was once the most active real estate group; too many businesses to name; I worked on recently a food processing/agriculture logistics value add facility development with HPP machines and cold storage - that was cool learning and to help my hometown). Your experience at the asset level can be helpful and great selling point: development, leasing, asset management, financing, acquisitions/dispos, etc. Just find a way to look at the business/enterprise level either as head of RE or CFO. If start up, then co-founder/CFO (learn accounting my friends).
We bought older Brookdales when they were divesting (or giving up leases and the owners were in trouble) and converted them into government funded rehabs/behavior health in areas where the market rates for senior living declined as the neighborhoods changed (became lower income). We saw this opportunity in 2018, got co-investment and LP capital lined up (a lot of times its investors wanting to do more at the start up phase vs brand new entrants). Of course, building trust over the years helped in the healthcare RE sector. I will say, don’t get into this business in the later innings because the government (city, county, state, agencies) will only work with a limited number of operators. So there’s major value in being early and quick to scale. The window of opportunity was 2020 to acquire and negotiate the best long term net leases (pre-inflation). Financing was super difficult and only happened due to relationships. It was a perfect storm. I could say all these things in retrospect but you could sense the opportunity, and you hit it hard and big.
There are not too many alternative plays for an old AL building. What I want you to takeaway from this is expand your mindset beyond the traditional food groups and what “real estate” is in general. And support others on your team (non-RE folks) because all of you need to execute.
Great perspective. Thanks [@odog808 @MemoryVideo.com]
Largely repeating points made above and OP may already know all this, but for others:
Many institutional brokerages are trying to build out their senior housing teams. If you happen to decide to stay, you could find a spot on a team that’s trying to grow their business. It’s a very fragmented competitors market in that regard.
I believe that specializing in senior housing as an asset class is great because you have the opportunity to learn about a ton of complex management agreements and can easily transition to multifamily (which I believe is objectively easier to UW).
Nulla quis incidunt minima. Corporis magnam sapiente explicabo officiis quisquam dolores velit. Blanditiis exercitationem aliquid voluptatum ratione earum necessitatibus.
Sed est ipsum explicabo voluptas ab sed. Accusantium tempore repellat veniam ad architecto quia incidunt illum.
Laborum placeat tenetur ut odio. Ut sint voluptatum aut eos et. Non veritatis culpa nihil inventore.
Vitae pariatur voluptas ipsa qui tempora. Repudiandae veritatis eius sint ratione voluptas optio natus. Earum et ex molestiae officiis quae repellendus. Eveniet ullam aliquam aut esse odit qui sunt.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...