LMS Discusses Senior/Assisted Living Market

By Tasha Anderson for Arizona Builder’s Exchange

The latest hot topic on the AZBEX Leading Market Series list was Senior and Assisted Living, and attendees gathered at the DoubleTree by Hilton Tempe on Thursday, November 1st, to gain insight into the market and how development is adapting to the needs of a generational shift.

AZBEX President Rebekah Morris began the presentation by once again giving attendees a brief overview of the market with analytics taken from the AZBEX Database.

“There are a ton of players in this space,” Morris began as she noted the top owners in the senior living market, including Ryan Companies and The Hampton Group, Inc. at 6 percent, Life Care Services at 5 percent and Arizona State University and Pacific Retirement Services at 4 percent. “This is an enormously diverse market sector. Tons of players.”

She went on to note the top design firms in the sector, with Todd & Associates Architecture at 11 percent and Ankrom Moisan Architects, Inc. at 8 percent. She also noted that 16 percent of projects have not selected a general contractor.

Occupancy and Amenities

After a quick rundown of the market, Morris invited panelists Jon Scott Williams, executive director of Fellowship Square – Mesa; Heidi Begeot, director of Barings Multifamily Capital; Don Lloyd, president of DRL Company; Eric Johnston, partner at LivGenerations; and moderator Bryan Dunn, president of W.E. O’Neil Construction Co. of AZ to discuss the senior living market in greater detail and provide attendees with a look at future trends.

One of the biggest trends the panelists discussed was the steady decrease in occupancy in assisted living and a shift in development toward more independent living facilities.

“In second quarter of this year, skilled nursing occupancy actually dropped to an all-time low of about 81-82 percent,” said Begeot. “I think that trend will probably continue for a couple of reasons. One is just driving models to lesser levels of care and the increase of home health in assisted living. The other is reimbursement is super challenging and everyone’s just trying to figure that out.”

Lloyd mentioned his company is restructuring to let go of some of their assisted living facilities and add more independent living spaces to increase occupancy and save money.

“We pay $55 a day for our Medicare residents out of our own pockets,” Lloyd said. “That’s not reimbursed to us by the state.”

Another major trend is the shift to more of a hospitality feel in senior living facilities due to the change in preference from generation to generation.

Williams noted that where the Silent Generation — born between the mid-1920s and mid-1940s — liked to customize their own residences by putting the money in and doing the work themselves, the Baby Boomer generation prefers to have all of their amenities included in their price.

“Where they want something, they’ll seek value,” Williams said of the Silent Generation. “Where they need something, they’ll seek price.”

What are Owners Looking For?

Toward the end of the presentation, Dunn asked the panelists what owners are looking for in their development team and the panel seemed to be in agreement that experience was key to a successful business relationship.

“They have to have been there, done that… and got the shirt to prove it,” Lloyd said. “Seriously, you want experience. That’s what you’re buying; so that’s what you need.”

Being able to work as a team was also number one on Lloyd’s list. “He’s got to be a team player. He’s got to be a partner. He’s got to be collaborative and he has to look at the owner’s interests first.”

Johnston agreed and added that he looks for teams who can provide more than just the typical features to a senior living facility.

“We really thrive on cutting-edge visionary kinds of things,” he said. “We call upon the architect to take what we’re trying to visualize in terms of that resident’s lifestyle… to help us draw the spaces and create the corridors and stay cutting-edge with rules and regulations.”

From a funding perspective, Begeot noted how important it is to have the whole team together from the beginning for checks and balances.

“The whole team has to be together in the beginning because the architect can design a beautiful building, but by the time the contractor costs it, it might be more expensive than the loan you wanted.”

Begeot also gave the owners and developers some advice from a finance perspective, circling back to the importance of occupancy in the senior living sector.

“It’s very difficult to lease up a brand new building than to maintain an existing one when it comes to occupancy.” She said. “So, for us when we are financing, if it’s new construction, I don’t want to just know that person’s experience in senior housing, I want to know how many buildings you have actually leased up from zero.”

The last Leading Market Series for 2018 on December 6th will discuss Multifamily development. To check out 2019 dates and topics or to register for the next event, visit: http://lms.azbex.com/

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