Companion to: Real Estate Decoded Chapter 19 (Senior Living) - Workbook tab 10_Senior_Living
Inputs
Outputs
Annual revenue (stabilized)
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Operating expenses
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NOI
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NOI per unit
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Implied value
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Per-unit value
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How to read this tool: Senior living combines real-estate economics with care-services operating economics. The institutional buyer must underwrite operator quality (the regional operator partner) as much as the building. Welltower, Ventas, National Health Investors are the public REIT giants in the space.
What this tool is for
Senior living demographics are unambiguous: the 75+ population is the fastest-growing age cohort in US history. But asset-class performance has been mixed because operator quality dominates outcomes more than in pure-real-estate categories. The institutional discipline pairs the REIT capital with regional operating partners that have demonstrated census performance.
Benchmarks the practitioner watches
- IL-only: 88-92% stabilized occupancy, expense ratio 50-55%
- AL/MC blend: 85-90% occupancy, expense ratio 62-68%
- Memory-care heavy: 90-94% occupancy, expense ratio 70-75%
- Operator quality premium: 10-15% NOI lift vs. average operator on same building
- Cap rate: 6.5-8.5% institutional (lower for IL-only triple-net, higher for AL/MC operating)
Common mistakes
- Underwriting average operator economics when partnering with a sub-average operator
- Missing the wage-inflation pressure on caregiver labor (15-20% wage growth 2021-23 in many markets)
- Treating IL and AL as the same business - the operational complexity is materially different
- Underestimating the resident-turn cost between unit types (move from IL to AL triggers turn cost + downtime)
Educational reference only. Not investment, tax, legal, or real-estate advice. Confirm market-specific cap rates, lender terms, and tax overlay with your own advisors before acting.