An asset class getting a lot of attention at the moment is Senior Living Property Developments, and it is not hard to see why it is catching the eye of investors.
The asset class covers retirement villages, that might also include assisted living and/or memory care (Alzheimer's and Dementia) units.
The combination of property, hospitality and needs-driven services offered by this type of development create a resilient investment that has the benefits of real estate and the strength of health care.
Gabriela Farias, the Head of Global Revenue at the Global Wealth Group, refers to senior living as “the new hot asset class” and “a combination of asset classes”.
The two main reasons it is gaining popularity are: the ageing Boomer generation; and a generous supply of distressed properties in this asset class due to the market becoming saturated and the devastating effect of the Covid-19 pandemic.
The Boomers play a role because they are the largest generation (the term “Boomers” comes from the post-World War 2 baby boom) and the fact that the oldest members of the generation “will be turning 80 in about five years’ time, the age at which people start moving into assisted or senior living developments. Buying into this type of property now means profiting from it when there is a big increase in demand in about five years’ time”, says Farias. This makes it a longer-term investment, requiring some patience on the part of investors.
The second reason comes from the fact that in property, money is made on the buy side, not the sell side. Buying properties facing foreclosure or already owned by the bank for much less than they are worth immediately increases the odds of making a tidy sum when selling. These properties can then be upgraded, revamped and fitted with all the facilities that elderly people need, so they are ready to sell just as the Boomer demand begins to emerge.
One company that is making its name in the senior living space is McFarlin Group, a US-based company that is focused on the US’s Sunbelt states popular with retirees, including Alabama, Florida, Georgia, New Mexico, Texas and California.
The fund set up to buy the properties that meet McFarlin’s criteria has the following objectives:
- Buy distressed US senior living assets.
- Add value to them over four years.
- Aggregate the properties for an institutional exit.
- Set an internal rate of return of more than 20%.
The good news for South African investors is that they can get a piece of the action too due to the recent tie-up between McFarlin and Global Wealth Group. Partners based in the same area as every development ensure that the investment ticks all the investment boxes and nothing is forgotten.
Farias says: “Buying into the fund is a way to get your Rands offshore and you will probably start seeing some returns in about three years. South African investors can take advantage of a growing asset class.”
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