As more senior housing communities are built to meet growing demand for their services, competition in the sector is increasing. Communities are taking different avenues to address this. Some communities are choosing to compete on price, while others are attempting to compete by differentiating themselves with capital improvements, such as building new wings with fitness centers, bistros, and entertainment rooms. When embarking on capital improvement projects, communities with strong finances hold an advantage over their counterparts. This provides another incentive for senior housing communities to generate healthy operating margins and maintain strong financial positions.
The Benefits of Positive Finances
Communities with strong finances can request a credit rating from an credit agency. A positive rating can increase business opportunities and make it easier to obtain less expensive capital. A positive credit rating also gives communities greater flexibility, since banks and other creditors are more willing to offer better interest rates and other financing terms. Communities in strong financial positions can use this as a marketing tool when meeting with prospective residents, who are likely to associate financial health with competent operations and capable staff.
Credit Rating Factors
Multiple factors can boost a community’s credit rating and enhance its business prospects and access to capital. Some of these include strong balance sheets and cash flows, high occupancy rates, positive debt metrics, and revenue generating capital improvement projects.
High demand for a community’s services can boost a number of these factors, but demand alone is not enough to build strong finances. A capable operator with exceptional management skills is also needed to produce strong financials.
It is no coincidence that successful communities are run by operators who excel at managing expenses, adhering to budgets, and making strategic decisions that help the community thrive during good economic times and mitigate potential losses during bad ones. The most successful communities are very deliberate when choosing an operator, and they work to ensure the community achieves its financial potential while providing excellent care to its residents.
One reason senior housing owners and operators strive to maintain strong finances is to gain additional business opportunities and easier access to capital. One such firm is the Chicago-based financing firm Cambridge Realty Capital. Cambridge Realty Capital has over twenty years of experience in real estate financing and currently focuses on the senior housing market. Senior housing participants and investors interested in obtaining capital for growth, debt refinancing, acquisitions, or for other purposes should contact Cambridge Realty Capital to learn more about the many financing options it offers for a variety of senior housing transactions.
