Seniors Housing Business

MAY-JUN 2018

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

Issue link: https://seniorshousingbusiness.epubxp.com/i/985760

Contents of this Issue

Navigation

Page 28 of 40

28 www.seniorshousingbusiness.com Seniors Housing Business n May-June 2018 By Jane Adler An investment in memory care would seem like an almost no-fail proposition. More than 5 million people already suffer from Alzheimer's disease and other forms of dementia — a num- ber that is expected to triple by the year 2050. Lately, however, investors have become somewhat wary of putting capital into new units designed only for persons with memory loss. Concerns have mounted about overbuild- ing as the number of memory care units has increased quickly over the last five years while occupancies have slipped. Investors are hedging their bets, opting to mostly fund buildings that offer assisted living along with a smaller portion of memory care as a way to provide a continuum of care for resi- dents and keep buildings full. Then there's the issue for investors of finding a quality operator. Residents with memory loss are difficult to manage, requiring a high num- ber of staffers with special training in dementia care, which cuts into profit margins. Still, freestanding or stand-alone memory care facilities have their supporters. They argue that a property designed only to provide mem- ory care is best positioned to offer the optimal environment for those suffering from memory loss, a group that is only going to continue to grow. "I'm a big believer in stand-alone memory care buildings," says Adlai Chester, chief investment officer at Invesque, a healthcare real estate investment company based in Car- mel, Indiana. "I like focused buildings rather than ones that try to be a jack-of-all-trades for seniors." By the numbers Memory care is facing headwinds as the number of units has grown. Five years ago, in the first quarter of 2013, there were about 63,000 memory care units across the 99 primary and secondary metropolitan markets tracked by NIC MAP, a service of the National Invest- ment Center for Seniors Housing & Care (NIC) based in Annapolis, Maryland. As of the first quarter of 2018, the number of memory care units had risen to about 98,000 — an increase of about 55 percent from 2013. Many of the new memory care units are in buildings that offer both assisted living and memory care. The ratio of assisted living units to memory care units in a com- bination building is typically about two to one. Memory care units in com- bination buildings grew by about 60 percent over the last five years, rising from about 40,000 units in the first quar- ter of 2013 to 64,000 units in the first quarter of 2018. Memory care units in stand-alone buildings over the last five years increased from about 22,000 to 34,000. "Memory care inventory in combined com- munities has been growing at a faster pace than freestanding memory care properties," says Lana Peck, senior principal at NIC. This wave of new con- struction has resulted in lower occupancies. In the first quarter of 2018, NIC data shows that build- ings offering both memory care and assisted living recorded an average mem- ory care occupancy rate of 84.9 percent. That was down from the peak of 89.3 percent in the third quarter of 2013. The average occupancy rate at stand-alone memory care buildings peaked in the second quarter of 2014 at 86 per- cent and currently stands at about 81.1 percent. The number of new units coming on line peaked in the third quarter of 2016. The growth of new combination and freestanding build- ings has moderated recently, allowing the absorption of units to meet or exceed inventory growth in the past three quarters, notes Peck. Investors Rethink Memory Care n Investment The long-term prospects are encouraging for this specialty segment, but facilities with more care options have recently gained favor. Adlai Chester Invesque Chad Elliott Lancaster Pollard Although the total number of units has steadily increased, stand-alone memory care has not grown as quickly as memory care mixed with other types of care, such as assisted living (AL). As investors face potential overbuilding, they are hedging their bets by preferring a continuum of care that includes at least assisted living along with memory care. Inventory Source: NIC top 99 primary and secondary U.S. markets Stand-Alone Memory Care Fades

Articles in this issue

Links on this page

Archives of this issue

view archives of Seniors Housing Business - MAY-JUN 2018