Certainly yes! Let’s look at a typical memory care or assisted living unit and address three key operational issues:
1. For every additional occupied memory care unit (for occupancies in excess of 80%), one could assume approximately 30% of the additional monthly service fee would go for new, incremental expenses. That is because at relatively high existing occupancies, most operating costs already are incurred and paid.
2. Approximately 70% of the additional monthly service fee results in a very high incremental profit margin, new cash that drops right to the bottom line.
3. For a single-facility memory care operator with a typical baseline monthly service fee of $6,050 per month, the 70% incremental profit margin results in new cash flow benefit of $4,235 per month, or an annual cash increase of $50,820 for each additional occupied unit.
With a 7% cap rate, this could increase the value of each additional occupied unit by over $725,000.