On today’s show we’re going through the thinking process of how to assess whether you are evaluating a viable project or not. This was a property that we got under contract because it looked like it had potential at first.
In this case we were presented with the opportunity to convert an assisted living project in Utah. The facility lost its operating license and our analysis is that assisted living projects in this particular submarket have a hard time financially.
The individual suites could be repurposed as apartments and an apartment conversion initially looked attractive on the surface. But the problem is that there is insufficient parking for an apartment building. People residing in AL don’t drive, so there is not much parking. In fact the parking ratio is approximately 1/3. We would need to add more than 40 parking spaces to have a viable apartment conversion.
We spoke with the city and they would have been supportive of an apartment conversion. They agreed that we needed more parking and assembly with one of the neighboring parcels would be essential to creating sufficient parking.
We looked at a hotel option. The suites were well suited to a hotel offering. But unless we could assemble a neighbouring parcel and build at least 40 more parking spaces, the project would not be viable as a hotel.
In the end, we decided to pass on this opportunity. It was looking like it was going to be a forced fit to make the property work physically. Even if we undertook the effort to convert the building to meet the minimum criteria as apartments or a hotel, it would still be a poor quality apartment building and a poor quality hotel. Neither of these screamed that we should go forward.
We get a regular flow of opportunities like this crossing our desk. Do we feel bad about spending the effort? Not at all. This is part of the process of finding that rare subset of projects that ultimately do meet our criteria.
Host: Victor Menasce