Residential upside meets commercial stability

Most real estate forces a trade-off. Residential property has historically appreciated well but comes with short leases and frequent turnover. Commercial property offers long, stable leases but its value is driven largely by cap rates, so appreciation tends to track inflation-linked rent increases rather than underlying property growth. The Rocfey model is built to capture the better half of each.

Commercial-style lease stability

A Rocfey home is leased to a licensed care operator - a commercial operating business - not to an individual residential tenant. That changes the lease profile entirely. Where a typical residential rental runs on a one-year lease with regular turnover, our leases are structured to be long-term, commonly around a five-year term with a five-year renewal option. A commercial operator running a licensed care business has strong incentives to stay in place, which means lower turnover and more predictable lease income for the real estate.

Licensed and regulated

These are not informal arrangements. The care businesses that lease our properties are licensed by the State of California - through the Department of Social Services for RCFE and assisted-living uses, or the Department of Public Health for Congregate Living Health Facilities. That licensing raises the bar for who can operate, adds regulatory oversight, and reinforces the stability of the operator tenant relative to a standard residential renter.

Residential-style appreciation

In commercial real estate, investors typically focus on the cap rate, and a building’s value is closely tied to its income. Appreciation therefore depends largely on raising rents, which over time is often limited to inflation-linked escalators. Residential real estate behaves differently: home values in strong Southern California markets have historically grown faster than that.

As an illustration, Orange County residential real estate has historically appreciated on the order of roughly 6% per year - ahead of what a typical commercial building’s value would grow on rent escalators alone. Because a Rocfey asset is still a residential home at its core, it can participate in that residential appreciation while also producing commercial-style lease income. These figures are illustrative and historical; past performance does not guarantee future results, and property values can fall.

Higher rent through added square footage

Our conversions typically add square footage and upgrade the home for licensed care use. A larger, purpose-built, licensed care home supports meaningfully higher rent than the same house would command as an ordinary residential rental. In practical terms, the property company (PropCo) that owns the real estate can charge the operating company (OpCo) that runs the care business a rent well above standard residential market rent - improving the income the real estate produces.

Why we believe this is a better structure

Put together, the model is designed to deliver the long, stable, licensed-operator leases of commercial real estate and the appreciation potential and higher rent of an enhanced residential home. We believe that combination compares favorably to investing in a plain residential rental (short leases, turnover) or a plain commercial building (cap-rate-bound appreciation) on its own. It is not without risk - operator, licensing, construction, regulatory, and market risks all apply - but the structure is the core of why Rocfey exists.