Seniors Housing Business

JUL 2018

Seniors Housing Business is the magazine that helps you navigate the evolution of the seniors housing industry.

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Page 18 of 40

18 Seniors Housing Business n July 2018 By Jane Adler Macro trends have a huge impact on the seniors housing and care industry. The econ- omy, demographic shifts and the housing mar- ket are some of the factors that play a big role in the health of the sector. What's interesting is that big trends don't necessarily affect for-profit and nonprofit pro- viders in exactly the same way because of their underlying, and different, business models. With that in mind, here are five trends driv- ing the future of nonprofit providers. 1. Occupancies are strong The recovery of the single-family housing market has had a positive impact on occupan- cies at nonprofit continuing care retirement communities (CCRCs), or what are also called life plan communities (LPCs). Older homeowners are more likely to move nowadays than a few years ago coming out of the Great Recession because they're able to sell their homes at decent prices. After falling 33 percent during the Great Recession, home prices in most markets have returned to peak levels, growing 51 percent nationally since bottoming out in March 2011, according to CoreLogic, a property analytics firm based in Irvine, California. Homeowners typically use the proceeds of the sale of a primary residence to pay the large entrance fee commonly charged at CCRCs/ LPCs. About 80 percent of CCRCs/LPCs are sponsored by nonprofit organizations, accord- ing to Chicago-based Ziegler Investment Bank- ing, which tracks the nonprofit sector. Occupancies have been rising at CCRCs/ LPCs, and especially at nonprofit communi- ties. In fact, nonprofit CCRCs/LPCs have led for-profit communities in occupancy by a gap of about 5 percentage points for 10 quarters, according to the National Investment Center for Seniors Housing & Care (NIC) based in Annapolis, Maryland. More specifically, the average occupancy rate at nonprofit CCRCs/LPCs in the top 99 mar- kets in the first quarter of 2018 was 92.2 per- cent compared with 87.7 percent at for-profit communities. In contrast, occupancies have been falling at assisted and independent living properties, primarily due to a wave of new con- struction by for-profit own- ers. The occupancy rate in the first quarter of 2018 for assisted and independent living properties in the 31 primary markets averaged 88.3 percent in the first quar- ter of 2018, down 50 basis points from the prior quar- ter and down 90 basis points from year-earlier levels, according to NIC. Assisted living occupancies in the first quarter of 2018 stood at 85.7 percent, down 1.3 percent- age points from a year earlier. Coupled with the housing rebound, scant new construction is helping to bolster occupan- cies at CCRCs/LPCs. Also, the new construc- tion is concentrated in several markets, most notably Philadelphia, Kansas City, Los Angeles, Dallas and New York, says NIC. Most of the new nonprofit construction consists of add- ons to existing campuses, repositionings, or a change in the unit mix, says Steve Maag, director of residential communities at LeadingAge, the industry association that represents nonprofit commu- nities and service providers. "Our members are sprucing up their existing campuses," says Maag, whose office is in Washington, D.C. 2. Existing providers are building lion's share of new projects Very few new nonprofit organizations are entering the CCRC/LPC market. Existing pro- viders seeking to expand their portfolios are the ones sponsoring most of the new communi- ties that are getting built. "New construction is an expensive and time- Five Nonprofit Trends to Watch n Development Market and regulatory forces alike are having a profound impact on the business model for continuing care retirement communities. A $150 million redevelopment is underway at Oak Trace in Downers Grove, Illinois. Lifespace Communities of Des Moines, Iowa is the owner-operator managing the project. Mary Leary Mather LifeWays Jeff Kaighn Acts

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