tread the same fine line, seeking to balance perceived internal need against external competitive pressures. “It’s not an exact science, but when you

have a new competitor that’s opening up in your marketplace, you want your building to show well. We are always paying atten- tion to that, and we have done renovations where the timing was driven by new com- petition opening up in the marketplace,” Lessard said. “It helps you to be fresh and shiny like a brand-new competitor, instead of having some aspect of the building that’s a little dated or worn.” While these diverse factors all help to

shape a capex strategy, there’s another principle at play that also carries weight. In the vernacular: Money talks. While it isn’t always possible to chart a direct and measurable return on investment around capex efforts, ROI can be and often is a determining consideration.

The ROI of capex By definition, capex is capital-intensive: The need for ongoing refurbishments means that senior living executives must regularly build a capex reserve into the annual budget. Across senior living, this reserve typically runs between $250 and $500 per bed per year, said Rudy Trebels, CEO of Wedge- wood Investment Group, an investment banking entity focused on financing senior living communities. That’s a weighty sum, and yet senior liv-

ing executives often will be hard-pressed to put a number on the payback for a capital investment project. If the aim is just to re- fresh stale spaces, to sharpen up the décor in order to keep pace with changing tastes, it can be hard to say how much exactly that contributes to the bottom line. Sometimes, though, ROI is measurable

and verifiable. Lessard for instance has undertaken a

number of renovations in which memory care has been converted to secure memory care. “We look at that as an ROI project,” he said. “You do it because you have de- mand and because it will enhance your bottom line. We run projections: If we take this wing and convert it to 24 units of secure memory care, what is the return on invest-

A $5 million upgrade to Vi at Aventura was recently completed, marking a refresh of the 15-year-old community.

ment and what is the timeline for that?” When Vi moved to create its new model

of a clubhouse adjacent to independent liv- ing, the company was pursuing a calculated return. Executives believed that selling 72 residences with an average entrance fee of around $1 million would rapidly offset the construction expense. “Our business model is pretty conservative,” Smith said. “We have no debt on any of our communities and historically we only take on construc- tion debt when it can be repaid through the sale of entrance fees.” Still, he said, the math isn’t always that

straightforward. “It’s difficult to project what your future cash flow will look like if you don’t do a project. That is actually the harder part,” he said. “Sometimes you have to convince yourself that if you don’t do the project you either won’t stay as fully occupied or your pricing won’t be able to grow as much. On the flip side, you have to assume the market will accept what you have to offer.” Smith’s best guide for making the call:

Look at competing projects nearby. “If your project is comparable or superior, that gives you confidence that you could also be successful,” he said. At the end of the day, though, ROI is

only one variable in the complex capex equation. Since capex isn’t always undertak- en with a direct financial payback in mind, several other factors also go into the mix. In


most senior living operations, a whole host of players will contribute to that discussion, with the executive director playing a critical role in shaping the conversation and ulti- mately organizing priorities.

The capex process While a variety of regional and corporate executives typically will help to shape the capex strategy, it is the executive director who often stands on the front lines, offering a firsthand view of a community’s needs and challenges. Marty Jensen is the executive director

at Wyndemere, an LCS community in Wheaton, Ill., offering 237 independent living residences, 65 for assisted living, 12 for memory care, and 115 skilled nursing units—comprising about 460 residents and 400 staff, all told. Over the past three years the company has replaced office and storage space with memory care in a $1.2 million project, and is currently in the midst of a $3.2 million renovation that includes an overhaul of the existing health center. “The first thing I look at is safety, then I

look at security, then I look at first impres- sions, then I look at resident experience,” Jensen said. Resident committee feedback is key to forming this catalog of needs. “We are always looking for that feedback from residents, what they like and what they don’t like. I want to involve them in the process, especially in the selections piece: What kind

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