THE RIGHT TIME.
The needs-based senior housing industry will experience significant growth over the next 10+ years. In the U.S., there are approximately 23,400 investment-grade senior housing and care properties containing 3 million units. The total value of this investment-grade seniors housing and care property market is estimated at $372 billion (assuming a $165,000 price per unit for seniors housing properties and an $81,000 price per bed for nursing care properties).
In 2015, the population of individuals aged 80 years or older was 12.1 million, which represented 4% of the population. The latter part of the 2020’s is expected to see the beginning of significant acceleration in this population, with the 80+ population growth rate averaging roughly 4.5%. (source NIC)
The senior housing industry is not strongly linked to economic change and has fared well even in economic downturns. In fact, over the last 10 years the senior housing industry has outperformed all other commercial real estate asset classes and consistently offered the highest returns to investors.
THE RIGHT PARTNER.
We will embark upon an aggressive plan to form strategic partnerships with strong operators in the Senior Housing Industry. We expect that one of our competitive advantages will be our ability to structure “win-win” scenarios.
Our extensive network and relationships within the industry will enable us to successfully execute our investment strategies. These relationships augment our ability to source opportunities with developers, operators, capitalize on development and capture repeat business.
THE RIGHT MARKET.
As illustrated below, the Senior Housing Industry has outperformed all other asset classes.
15.00% - 18.00%
PROJECTED EQUITY MULTIPLE
PROJECTED HOLDING PERIOD
3 - 5 Years
Successful real estate investment requires the implementation of strategies that permit favorable purchases, effective asset and property management for enhanced current returns and maintenance of higher relative property values, and timely disposition for attractive capital appreciation. We believe that our experience will help us identify favorable property acquisitions, enable us to forecast growth and make predictions at the time of the acquisition of a property as to optimal portfolio blend, disposition timing and sales price. Implementing our overall strategies, including individual market monitoring and ongoing analysis of macro- and micro-regional economic cycles, we expect to be better able to identify favorable acquisition targets, increase current returns, maintain higher relative portfolio property values, conduct appropriate development or redevelopment activities and execute timely dispositions at appropriate sales prices to enhance capital gains.
Propcovest provides an investment vehicle for the growing “needs based” Senior Housing Industry. Offering investors predictable cash flow, defined exit strategies, capital preservation and above average returns. We will use appropriate risk / reward leverage typically not surpassing 70% loan-to cost. Structured with an initial 15 Year NNN Lease we can mitigate any increased operating costs and provide predictable cash flow. Unlike traditional real estate investments, our leases include a lease-to-own provision creating a defined exit strategy with capital appreciation. The terminal values have annual increases to incentivize the operator to stabilize the asset and purchase the property. Upon stabilization, the operator can purchase the property utilizing HUD or Agency Financing.
15 Year NNN Leases
Appropriate Risk / Reward Leverage
Positive Cash Flow
Defined Exit Strategy
Capitalized Reserves to Mitigate Risk
We will enter into agreements with operators that are looking to expand their footprint. We believe this strategy provides us with three key benefits:
• Higher Going in Yields
• Potential for Critical Mass
• Capital Appreciation
To protect ourselves from inflation and increased operating costs we will have our leases require the operator to pay all of the costs associated with operating and maintaining the property such as maintenance, insurance, taxes, structural repairs and other operating and capital expenses.
Our acquisitions will be through long-term build-to-suit leaseback transactions in which we develop properties for the companies that simultaneously lease the properties back from us. These “transactions provide the lessee company with a source of capital that is an alternative to other financing sources such as corporate borrowing, real property mortgages, or share sales of common stock. We believe this approach can result in less risk to investors than an investment approach that targets other asset classes. In addition, we believe that properties under long-term triple net leases offer a distinct investment advantage since these properties generally require less management and operating capital, have less recurring tenant turnover and, with respect to single-tenant properties, often offer superior locations that are less dependent on the financial stability of adjoining tenants. In addition, since we intend to acquire properties that are geographically diverse, we expect to minimize the potential adverse impact of economic slowdowns or downturns in local markets.
By focusing on the acquisition triple-net leased properties to creditworthy operators for a minimum of 15 years presents an optimal risk-adjusted return and will help us achieve our investment objectives;
to provide current income for through the payment of leasing revenue and
to preserve and return capital and to maximize risk-adjusted returns. By primarily acquiring long-net-leased properties, we can create an investment vehicle that produces stable and predictable revenue
net-leased properties leased long-term, as compared to other investments, typically are insulated from operating expense increases and vacancy risk.
Unlike traditional investments, we will negotiate a terminal value with the operator based on actual project costs. This provides investors with predictable yield returns.