A preliminary market study is the least expensive and does not include on-site primary research. New apartment demand, rental rates seniors can afford and a market penetration rates are provided. A favorable preliminary study is often suitable for dialogue with investors and initial discussion with lenders. Our preliminary study includes demographic data charts which a lender and investor require to review analyst's assumptions. A Comprehensive Market Study is the most thorough analysis conducted on-site within the development location area. Significantly more time is invested collecting and analyzing important competitive and market information. Owner-operators of seniors housing always perform a Comprehensive type Market Study before investing millions of dollars in architectural design then development. A Multi-site market study compares two or more potential development locations determining which real estate locations offer the better potential for developing an assisted living or seniors housing community. Developers entering a new market area prefer a multi-site market analysis initially to identify good locations and avoid locations that are over-built or appear to have weak senior demand. The better locations are then surveyed by the developer to determine if local zoning appears cooperative and real estate prices are favorable. A formal preliminary or comprehensive market study is usually commissioned once the developer forms and opinion on the favorable factors for good locations identified in the multi-site comparative study.
All market studies are not created equal. Just obtaining a price online without speaking with the market research firm may not provide you with sufficient information to make an informed choice. A cheaper price may not provide you with all initial information you need to make an informed decision. With this caveat, here is some insight. A lesser expensive market study which we call Preliminary Market Study can begin between $2,500 - $3,000 or more depending on the types of seniors housing you want analyzed (i.e. assisted living, memory care, independent living, retirement apartments or skilled nursing). On-site market research using both primary and secondary analysis methods - which we call a Comprehensive Market Feasibility Study begins at about $8,500 - $20,000. Again the cost depends on the seniors housing product types analyzed, the size of the market in which the study is conducted, and the number of various analyses performed (penetration rates, lease-up, cap rates, etc.) Also different analysts use different methodology to determine the total number of new apartments often called as 'in-demand.' Buying just on price without knowing what one analyst includes in their report versus another is important to determine. If there is a significant difference in price then the level of detail and extent of analysis is often different.
In our opinion development of a proforma should be developed after a market study but perhaps before significant expenditures for architectural design. A market study defines available development parameters. Your management team then decides which types of seniors housing to potentially build. An architect can also review a market study to better understand data conclusions. It has been our experience that persons entering the seniors housing marketplace often require more than 1 proforma after reviewing initial financial projects with cost inputs from an architect.
It has been our experience that at a minimum a market study and proforma are needed if your audience is an experienced seniors housing investor of lender. If your project will be submitted to no traditional money sources . . . or . . . the project is a CCRC or Master Plan development, then a Business Plan is likely required. In our opinion, new entrants to seniors housing can benefit by the process of thinking through development, operations and business strategy to achieve successful market differentiation and fast lease-up of apartment rentals.
In recent years, most lenders require a knowledgeable participant as a condition of obtaining a loan. This requirement is not necessary for experienced seniors housing operators with a proven financial track record. A relationship with an experienced senior living consultant; a seniors housing equity partner; or a seniors housing management firm is required. In addition, either of these seniors housing professionals understand the vagaries of developing an assisted living or seniors housing community and will help avoid costly financial pitfalls new entrants often make.
In addition to legal, accounting and tax advice a senior living consultant for new players in seniors housing is very important. Either of the three (3) types of consultant in question 4 above are suitable. An experienced seniors housing equity type partner in your venture likely brings development and operational experience. But you do give up a percentage of ownership which may be acceptable. A seniors housing Consulting firm usually brings market study, financial forecasting, development, integrating necessary operating procedures into a new facility and has sales and market experience. This consultant can be hired by the hour or usually for a turnkey project for a flat fee. A management company often will provide the same services as the senior living consultant but also management your seniors housing or assisted living facility for up to 5 years after grand opening. The management company receives a fee which is usually a percentage of income annually.
For specific information the U.S. Department of State administers this program with information at their website. Generally a foreign investor and their family are granted temporary U.S. Visas with an opportunity for US Citizenship by investing in targeted U.S. industry groups including assisted living. There are approximately 600+ regional centers approved by the Department of State who handle applications. A market study and financial forecasts are usually required. From application to foreign investor approvals can take up to 18 months due to background checks.