Key Takeaways
- New senior living developments face high costs, long timelines, and increased market saturation.
- Existing senior living assets may offer faster ROI and lower risk when properly repositioned.
- Value-add properties often have low occupancy, poor management, or outdated layouts.
- Rate growth potential is a key factor in determining long-term asset value.
- Repurposing unused space into modern amenities improves resident appeal and experience.
- Successful turnarounds focus on both operational upgrades and resident lifestyle programming.
From New Builds to New Beginnings
The senior living sector is constantly changing. For years, the main focus was on new construction, as developers raced to build modern communities from the ground up. But the landscape is shifting. A new strategy is gaining ground: acquiring and revitalizing existing properties with potential.
For operators and investors, this change presents a new set of opportunities. The future lies in acquiring existing senior living assets with value-add potential rather than taking on the cost and risk of ground-up development.
The Challenges of New Development in Senior Living
Building a new senior living community seems appealing. You get a brand-new building, modern amenities, and the chance to create something from scratch. However, this path is filled with growing challenges and potential drawbacks.
Rising Costs
The cost of land, materials, and labor has skyrocketed. These expenses make it much harder to get a new project off the ground and ensure its profitability. High initial costs mean higher monthly rates for residents, which can limit your market.
Lengthy Timelines
Building a new community can take years. From finding the right piece of land to navigating zoning laws and construction, there are many steps involved. Delays are common and can add significant costs, and this ties up capital that could be used elsewhere.
Market Saturation
In some areas, the market is crowded with new, high-end properties. Competing in a saturated market requires significant marketing spend and can lead to a slow and difficult lease-up process. These factors combined make new development a riskier proposition than it once was.
The Untapped Potential in Existing Assets
While new builds face headwinds, a wealth of opportunity lies within existing senior living communities. These properties often have hidden potential that the right operator can unlock. The key is knowing what to look for.
For an experienced team, an underperforming asset isn’t a liability; it’s a value-add opportunity. We define this opportunity as situations where an owner wants to exit, properties are mismanaged or in receivership, and there’s significant potential to turn the building around. This is where true value can be created.
What Makes an Existing Property a Good Opportunity?
Not every existing property is a diamond in the rough. We aren’t looking for properties that are already 95% full or considered A+ assets. Well-run communities with high occupancy are not the target—the real potential is in properties that are struggling but have good bones and a clear path to recovery.
So, you’ll want to look at these key factors.
1. Occupancy and Management Issues
A low occupancy rate is often the most obvious sign of an opportunity. It usually points to deeper issues, such as poor management, ineffective marketing, or a lack of appealing programs for residents. A property in receivership or one where the owner is simply looking for an exit strategy is a prime candidate for a turnaround.
2. Potential for Rate Growth
Another critical question to ask is: “What are the rates at? Can the rates increase?” Sometimes, a property is underperforming because its rates are well below the market average. An experienced operator can analyze the local market, make strategic improvements to the property and its services, and gradually adjust rates to reflect the new, higher value provided to residents.
3. Convertible and Unused Space
Many older properties have layouts that are no longer efficient. This can be a hidden advantage. Large, empty rooms or many smaller, unused spaces are blank canvases. These areas can be converted into modern amenities that today’s seniors want.
Some popular modern options include wellness centers, movie theaters, bistros, or physical therapy gyms. This creative use of space can dramatically improve the resident experience and attract new interest.
4. A Focus on Resident Experience
A successful senior living community is about more than just a nice building. It’s about creating a vibrant, engaging, and supportive environment. Our philosophy is that a successful turnaround is 60% focused on wellness and 40% on social.
That’s why we introduce robust wellness programs and social calendars that give residents a reason to be active and connected. This focus on lifestyle is often the missing piece in struggling communities.
Turning Distress into Success
The right partner can transform an underperforming asset. Here at Kaplan, we have consistently succeeded in acquiring distressed assets and leveraging our resources, connections, and specialized software to revitalize them. This approach lets us take a struggling property and help it grow and thrive.
Success comes from bringing a comprehensive toolkit to the table. This includes financial capital from partners, industry connections for better purchasing power, and proprietary management systems to streamline operations. Our ultimate goal is to assess if the asset has the potential to generate additional cash flow and create long-term value.
A New Era for Senior Living Investment
The senior living industry is evolving. While new development will always have its place, the smartest path forward for many investors and operators lies in strategy. Existing assets offer speed, flexibility, and meaningful potential—if you know where to look.
At Kaplan Development Group, we bring hands-on strategy, experience, and leadership to every transition. If you’re exploring new growth opportunities, we can help. Contact us today to connect with our team to discuss how we can help unlock long-term value.
