Older senior housing communities, in particular skilled nursing facilities, face numerous financial and operational challenges. For example, combinations of changing neighborhood demographics, shifting care option preferences, the presence of newer, modern competition and constraints on third-party reimbursement have increasingly caused nursing homes to struggle to maintain healthy occupancy ratios and cash-flow. Often, when cash-flow is tight, repairs and improvements are delayed, if done at all; senior housing property executive management and their governing boards can reasonably ask:
- Does it make sense to invest in a component of our campus that no longer may be as relevant?
- Is our mission as an organization being limited or compromised because of an inefficient physical plant that no longer serves the needs of residents and potential new residents?
- Are there repurposing options for older, inefficient buildings, and if so, how can they be financed?
These questions, important to all senior housing operators, are perhaps more acute for not-for-profit, mission-based organizations, who generally operate on tighter operating budgets. Moreover, the option of selling a building on campus to outside, third-party interests, may be counterproductive to the overall reputation of the community, as the buyer may not operate the property in a manner consistent with the original charitable mission. With so many aging senior living facilities facing financial hardship, creative measures must be taken to avoid eventual closures and bankruptcies.
The way forward may be the conversion of older, less-functional components of a senior housing campus, like a skilled nursing facility, to an affordable assisted living or age-restricted multifamily housing. Such a conversion could serve the dual purposes of: (1) expanding the mission of a not-for-profit provider whose primary operation is in the market-rate sector and (2) addressing a dramatic shortage nationwide of affordable housing, especially for lower-income seniors.
Please see our next edition for financing solutions!