Definition
Seniors living facilities are projects that provide residency, and sometimes a form of medical care to elder people. The asset class is growing in Latin America, and historically has consisted of large homes that have been converted to senior living homes. Often named ‘casas de ancianos’ these are the ‘shadow market’ of Latin America for seniors housing. New projects purpose-built seniors living platforms are being developed in Mexico, Colombia, and Chile. These are purpose-built and greenfield projects with American or European operators and sometimes have local investment from real estate funds (Sura Asset Management). Notable operators include: Belmont Village (Mexico), DomusVi (Colombia).
Types
Assisted Living – a housing facility for senior citizens who require some assistance with their daily activities, but do not require the 24-hour care of a nursing home or skilled nursing facility.
Skilled Nursing Facility – an in-patient rehabilitation and medical treatment center staffed with trained medical professionals, often like a nursing home. Patients are cared for 24 hours a day.
Independent Living – a housing option for seniors who need minimal assistance in their daily life. Habitants are capable of living on their own, and services such as housekeeping, meals, and laundry are optional.
Approaches, Relevance
Cost – least reliable, but can be used to calculate the going concern of the property
Sales comp or market approach – not many comps in Latam, so this method can be used to double-check or test the reasonability of the income approaches
Income capitalization – primary method of valuation. Operations drive value in this and DCF method.
DCF – Most reliable method as it focuses on operations. Properties with efficient and profit-producing operations generate the most value.
Value Impacting Factors
Management – in mature markets management is assumed to be competent. In Latin America, special attention is placed on evaluating it.
Property Type – a independent living facility is very different to a skilled nursing facility. These properties cannot be compared. It is important to research comparables and use comparables that are the same type as the subject property.
Important Inputs
Economies of scale – larger projects, similar to hotels can run more efficient operations as fixed costs can be spread over more rooms. Standard projects are over 100 rooms, and large projects can be over 200 rooms.
Demand coverage analysis – this is difficult to do because there are so few competitive projects – but could take into account ‘shadow market’ projects
Penetration/Occupancy – often, when evaluating demand, markets will show low penetration but high occupancy. This is due to the limited number of projects – but indicates strong demand. Projects analyzed by LOGAN have shown a range of vacancy of 20% to 5%.
Recent Trends
Demographics – the age of a population determines what overall demand will be for seniors housing. This may vary by city, with varying adoption rate by country. Latin America has a balanced demographic – which has a significant aging population component. Countries such as Mexico and Colombia have growing middle classes.
Deliverable
A. Value impacting considerations – summary.
B. Purpose, scope, limitations of the report.
C. Land description.
D. Improvement description.
E. Scope of work.
F. Highest and best use.
G. Approaches to value.
H. Reconciliation.
I. Certification statement
