Are we in the real estate business or something else?
By Steve Moran
This is a topic I have spent a ton of time contemplating. During the Spring NIC conference, it really hit home and has been sitting in my pending articles for a few months.
Framing the Question
When you look at the genesis of most senior living companies they fall into two categories . . . maybe three . . .
Family Business: A family business where someone had a real passion for caring for seniors (and likely saw some kind of economic benefit in that passion). I would argue that this is a great and terrible way to start a business. Great because of the passion, terrible because compassion can lead to bad decisions.
Real Estate: Real estate developers who were looking for better, fresher more profitable opportunities. There is no doubt that when everything goes right there is no better way to make money.
Investment: There are a number of folks who invested in senior living as a passive investment and then discovered that either the people who they invested with had no idea what they were doing and accidentally became operators (this happens more often than you might suspect); or . . . they started out as a passive investor and became active operators for either passion or profit motives.
I have no value judgments here because I think any of three geneses can result in great operations or not so good operations.
The Big Question
The challenge is that when owning and operating senior living is all about real estate then everything owners/operators do has to start with real estate. REIT financing has made senior living even more real estate-centric.
But what if . . .
Serving seniors, could be better done without real estate? So the big question I keep wrestling with is which is senior living . . . the real estate business or something else?
I am not suggesting we need to abandon real estate or that real estate is a bad thing because neither of those things is true, but if we primarily see senior living as a real estate play, then it really limits our thinking.
Quality of Life
I believe if we were to approach senior living as being a business that is committed to providing those who are older than . . . 65, 70, 75, 80, 85 or 90 an amazing life it would open vast new “Blue Ocean” opportunities. It might mean we would invent things for 60 to 80-year-olds that would give them a mind-blowing life. It might mean that we would double or triple our appeal to that 90% that has no interest in senior living as perceived today.
We must think bigger . . .