“My IC has approved going hard on a distressed senior housing loan purchase on Monday morning. I know you are a senior housing expert - can you gut check my numbers?” (It was a Friday in the early evening.)
I received this call from a distant friend/colleague with this urgent question. Sub-institutional firm, but very well established in CRE.
He proceeded to describe the deal in generalities, and less than a minute in I had pinpointed which property he was referencing. They were using a best-case scenario, outdated cap rate study. Margins were overly optimistic. Their view of exits was . . . rosy. Layering in our realistic-but-not-doomsday metrics, he realized they were overpaying by 2-3X.
I’ve seen this scenario unfold too often recently. Seniors housing is a phenomenal investment space when done correctly. However, it is challenging to do back-of-the-napkin analysis that comes close to the actual valuation. There are too many inputs relative to most other CRE product types.
Sophos provides both outside expertise and horsepower. We’ve consulted for multiple debt funds that like the space but wanted a specialist to opine, someone who lives and breathes senior housing every day unlike their generalist teams. We’ve also provided extra horsepower to teams with existing expertise who needed to work through organizational transformation, a lumpy transaction, etc.
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