Smaller REIT Prefers Building Properties over Buying Them

Edgewood REIT, based in North Dakota, finds building its own senior living properties  more prudent than buying existing ones. Edgewood REIT  leases most of its properties to the Edgewood Group who also own a development and construction company. The company manages 43 independent, assisted and memory care communities in several Great Plain and Rocky Mountain States.

The CEO says competition for properties is tough and available ones are usually overpriced because of historically low-interest rates. Larger REIT’s can pay more for properties than his smaller firm can. If there’s a purchase Edgewood would like to make that is beyond their means, they partner with another REIT (IRET) to pay for the acquisition. He says the region they operate in has a good, long-term outlook and are currently developing two properties in North Dakota and Idaho.

The age and type of customer entering senior housing today makes older buildings expensive to renovate. Those entering independent and assisted living centers are more discriminating than they were 20 yrs ago and demand the latest amenities – movie theaters, cafe’s, fitness centers, etc. Those moving to an assisted living community because of dementia (rising rapidly as more people live past 75, 80, 85, etc.) require specific protective measures which older buildings usually lack.

Slightly higher interest rates would cause property prices to decline and then flush many players out of the senior housing market.



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