Seniors Housing Business is the magazine that helps you navigate the evolution of the seniors housing industry.
Issue link: https://seniorshousingbusiness.epubxp.com/i/799407
28 www.seniorshousingbusiness.com Seniors Housing Business n February/March 2017 By Jane Adler Memory care isn't something senior living providers can afford to forget. The number of seniors suffering from memory loss continues to grow as families struggle with how to care for elders with Alzheimer's disease and other forms of dementia. Researchers estimate that 4.7 million Ameri- cans age 65 and above suffered from Alzheim- er's in 2010, a number expected to triple to approximately 13.8 million by 2050. As the demand for services has grown, so too have the number of buildings that offer mem- ory care. And competition is heating up. There were about 113,000 memory care units across the top 140 markets at the end of 2016, according to the National Investment Center for Seniors Housing & Care (NIC) based in Annapolis, Md. About 10,000 units of memory care were added last year. Established memory care providers with freestanding facilities continue to expand. Additionally, many new assisted living build- ings now offer a memory care wing. The wave of new development is hurting occupancies, especially in certain markets. As of the fourth quarter of 2016, the five markets with the lowest memory care occupancy rates in the top 31 markets were San Antonio (70.1 percent), Dallas (75.6 percent), Las Vegas (80.1 percent), Kansas City (80.5 percent), and Chi- cago (81.4 percent). The top five memory care markets based on occupancy rates were New York (93.3 percent), Pittsburgh (92.3 percent), Washington D.C. (92.1 percent), Baltimore (92 percent), and Port- land (91 percent). Though the break-even point profit-wise for occupancy varies by operator, most underwrite projects to at least a 90 percent occupancy rate, and some go as high as 95 percent. In response, developers are tweaking their strategies. They're picking new locations care- fully, avoiding overbuilt markets and seek- ing infill spots with little nearby competition. Developers are also clustering their projects in select cities in order to streamline management and concentrate marketing muscle. "There's no question you have to be strate- gic," says John Barbee, executive vice president of the LaSalle Group based in Irving, Texas. Considering the volume of new project devel- opments underway, it could take 18 months to two years for demand to catch up with the supply of memory care units, explains Barbee. "Everyone has to make adjustments and think outside the box," he says. The LaSalle Group owns and operates 42 freestanding memory care communities branded as Autumn Leaves. Another commu- nity is nearly ready to open and eight more are currently underway. Most of the properties are concentrated in Georgia, Illinois and Texas. Up until about four years ago, LaSalle focused on major markets. But now the com- pany is developing buildings in smaller mar- kets, such as Venice, Fla., and Greenville, S.C. Another LaSalle strategy is to seek sought-after parcels in healthy housing markets. For example, LaSalle recently opened a 50-unit facility in Overland Park, Kan., an affluent suburb of Kansas City. The parcel was a "hot" corner, according to Barbee, near a pocket of new housing. Single-family homes in the area range in price from $400,000 to $500,000, a good indicator that families can afford expensive memory care for an elderly relative. The cost of memory care at an Autumn Leaves facility ranges from about $6,000 to $7,000 a month, depending on the market. Areas with high land costs result in the highest rents. Overland Park was a desirable location for another reason, says Barbee. The town is devel- opment-friendly, but also has strict require- ments. "They are on top of their game in terms of what they want," says Barbee. "We are look- ing for that kind of suburb." He explains that town officials really know what services they need, including memory care, and they take a very sensible, business- like approach with new development. The infill approach Developers like infill locations too. There's usually less competition in spots where land is less available. And densely populated areas offer a deeper pool of potential residents. Anthem Memory Care has two infill projects underway in the Chicago area. The company develops and operates freestanding memory care buildings, and opened its first facility in Memory Care Developers Shift Course n Development As competition heats up, some turn to smaller markets or infill opportunities while others experiment with product mix. Porter Place in Tinley Park, Ill., a suburb of Chicago, is a new memory care project recently opened by Anthem Memory Care.