Lease-Up Success

Case Study - The SK Portfolio

In 1996 Senior Living Residences (SLR) joined together with SK Properties (SK), an experienced New England multi-family and single-family developer/contractor headquartered in New Hampshire, to develop an operating model and portfolio development for middle-income assisted living projects in Massachusetts.

Background

The business plan was to develop as many projects as feasible in a five-year time frame to produce a saleable portfolio to an operator. The project operating model was to develop middle-income oriented properties in markets outside the Massachusetts Route 128 belt while identifying deep markets that usually surround cities fitting that geographic description.

SK Properties and SLR jointly identified project locations and the necessary permitting to develop the site. SK acted as developer and general contractor to finance and construct the building. SLR provided all project operating pro-forma analysis for use by lenders and investors, as well as all marketing and operating functions through stabilized operations.

Using the Medicaid Program

SLR identified the relatively new Massachusetts Group Adult Foster Care (GAFC) Medicaid program as a key element in providing high occupancy and long-term project viability with “private pay” residents in the defined economic model. A key element to the success of the model is an individual’s ability to pay privately as long as possible, with a minimum two-year commitment, and then be able to access Medicaid funding for the balance of their stay at the project. This decision was made being aware that statistics demonstrate “lengths of stay” in the industry of 27 months. In addition, each community projected approximately 25% of apartments would be leased by Medicaid recipients at start-up. This participation indicated the project’s income diversity which in turn created a larger potential market for its services.

Successful Lease-Up & Sale

With an aggressive approach to sales and marketing, SLR accomplished rapid, cost-effective fill-up of SK’s communities. All projects were over 50% pre-sold and full within nine months of opening. SLR exceeded the national average stabilized occupancy (91.5%) by achieving between 98% – 100% occupancy at each community.

In March 2001, just under four years after the initial project opening, the portfolio of eight properties was sold at a value that exceeded original goals.