Torch the Playbook, Look for the Hurt

June 2017

From a conversation with an HCC investor June 7, 2017:

Q. Mike, back in the day you were all land. Now this hospital start-up in Paris, TX, a whole different critter that’s– wait– not even real estate. In between it’s been lots, office, self-storage, hotels, retail, student housing, assisted living, medical office buildings – really, where are we going from here?

A. As crazy messed up as this environment is, I’ve lost interest in forecasting but with each market twist, know this: you better have the discipline to torch the playbook and react to new playgrounds. In Paris, TX, we reacted to Obamacare. Overnight it made old-school hospitals obsolete, opening up a monster of an opportunity for someone to fill the healthcare void in the wake of massive hospital closings in Texas. For Paris, Texas, that someone was us. Anyone intimate with that town’s hospital knows it’s hurting for a new one.

But never mind Paris, Five years ago we were buying “used” real estate –100% leased and cash flowing — for dimes on the dollar. Those gone, we torched the playbook and asked, where is the need?

Answer: medical

But “used” is so overpriced now, the only opportunity left is in the build. Ridiculous isn’t it, being cheaper to build new than buy used. Adjust, señor, that’s the playground now, somebody moved the cheese.

What followed was a 2-building medical building in Frisco, two assisted living/memory care developments, one in Floresville, TX and one in Wylie, TX. All are comfortably ahead of projections and on track for an earlier-than expected payday.

What followed those? Nothing for 14 months, it was a long barren wait for Paris Lakes Medical Center.

And worth it.

SO: like a seasoned hunter, wait, look, listen: what is the market saying?

Where there’s hurt…there’s opportunity.