Hospitality Management & Development
Luxury Continuing Care Retirement Residences
Today, there are approximately two thousand Continuing Care Retirement Communities (CCRC) across the United States, almost all of these facilities are operated by companies that have only one or two locations. It truly is a ‘cottage industry’. Only a few companies have taken advantage of the void in the senior CCRC market by building and branding multi-unit companies across multiple states. The multi-unit companies currently in operation are limited to either Independent or combined Independent and Assisted Living facilities care; or the level of amenities and services are mediocre at best. Very few of operators, particularly in the western U.S., offer the highly sought out ‘continuing care’ services that offer a quality ‘stable’ retirement environment from Independent Living, through Assisted Living to Memory Care, Skilled Nursing and Critical Care. This cottage industry is on the verge of exploding and offers a significant business opportunity.
There are a few examples of multi-unit companies that have taken advantage of the shortage in quality housing for the affluent retirement market and fewer that have developed a recognizable “brand”. The successful “brand” creates value where the whole of the company has more value than the sum of the individual parts. Here are a few examples:
Holiday Retirement Corporation – an Independent Living only company that developed mid-quality (2-3 star) operations. They sold 380 of their 400 locations for several billion dollars two years ago.
Merrill Gardens – a 3+ star Independent and Assisted Living operation built 38 locations and just recently sold 80% of their company for $817 million and all accumulated debt.
Classic Residence by Hyatt – Now operated under the brand “Vi” they have 19 large luxury communities across the U.S. Nine of their properties are on a month-to-month rental basis with a moderately high entrance fee and ten buy-in locations where you pay a registration fee often $500,000 to well over $1,000,000, but with a variety of entrance fee return programs. Hyatt is privately held and current value is unknown.
On October 22, 2010, it was announced that Atria Senior Living, with 118 locations, was sold to Ventas, a Chicago-based real estate investment trust, for $3.1 Billion, making Ventas the largest owner of U.S. senior housing communities. Ventas owns and operates a combination of Independent, Assisted Living and full Continuing Care Communities. The Atria company acquisition offers Ventas a recognizable senior brand.
Hallmark Gardens Retirement Community (HGRC) specializes primarily in the development of luxury Continuing Care Retirement Communities (CCRC) for active and energetic senior citizens who wish to maintain their current residential lifestyle. Our integrated program of health care services provides our residents a secure quality setting that can include separate areas in the community for independent, assisted living, memory care, skilled nursing, and other special care. As we look to the future with tech-savvy baby boomers transitioning into the senior market, it is extremely important that we develop each property to be cutting edge ‘green’. This strategy is about more than reducing cost, it is a ‘brand’ statement about who we are, what we care about and how we see ourselves.
HGRC prides itself on creating a secure environment which includes the finest of daily life amenities. Our communities offer a unique blend of fine cuisine, excellent dining experiences, health and fitness facilities, recreational opportunities, transportation, organized social events, lush spacious grounds and outdoor settings that combine to create a quality of life that we believe enhances and extends the life experience for our residents.
The difference between HGRC and most senior facilities is:
A prime example of our superior service is found in our Care Rooms within the Skilled Nursing area. They are designed to be ‘family friendly’, a rarity in most skilled nursing facilities.
For immediate family members visiting their loved ones who desire extra time with their family member due to the resident’s condition we offer:
Our Grand People work with the Grandparents of local school children and are an integral part of the success of area schools by providing valuable leadership and expertise. This program creates a special bond with the community at large which in turn makes a positive connection from the community into what HGRC is all about. This in it’s self is a large part of our marketing effort.
What is unique about this program is that in a professional environment where there is a shortage of qualified nurses across the U.S. no one else offers this opportunity on their Continuing Care Campuses. The great opportunity about this program is that nurses programs are quite expensive and there is a waiting list in almost every nurse’s educational program in California. In many cases the wait is a year or more to begin in one of the various approved programs. HGRC and LTP have agreed to establish a college on selected sites at several of our campuses where it makes economic sense. Due to the shortage of nurses HGRC and LTP will offer scholarships to selected students. For educational financial assistance upon graduation they will commit to two years of paid service to HGRC at facilities of our choosing. This relationship guarantees that HGRC has a well trained and fully staffed nursing cadre and assures that we can maintain a significantly higher level of service than the minimum requirements of the state and federal government. Additionally, LTP benefits from expanded market opportunities offered by HGRC while their students get hands-on training with HGRC trained nurses while assisting with real patients in a working environment rather that in a classroom on mannequins.
We believe that these and other such differences set HGRC apart from other care facilities and communities.
We believe in and are committed to developing a marketable, profitable brand of luxury retirement continuing care communities that ‘uniquely’ provide not only the retirement living options of Independent living, Assisted living and Memory Care (Alzheimer/Dementia) but can, where appropriate, also offer Skilled Nursing and other Special Care. This is a rare combination in the United States where ‘nursing homes’ have developed a well deserved unfavorable reputation due to a lack of quality facilities and management oversight, and as a result are rarely included in the services offered by retirement community companies.
Our Goal is to the leader in the luxury Continuing Care Retirement Communities in the western United States by developing and operating a minimum of twenty-five (25) HGRCs over the next ten years.
From ‘Life Two’, A Midlife Improvement Magazine
Article by: Wesley on May 21, 2007
Results from a Del Webb Baby Boomer Survey:
There is no one exact model for success in the continuing care retirement community because success depends on to many human, market and location factors. But the key that we believe is most important is to offer multiple levels of care at one campus that allows members to age in a healthy, enjoyable environment. Residents have only one move to make for the rest of their lives.
What are the benefits of a Hallmark Gardens Continuing Care Community?
HGRC’s continuing care communities feature a choice of residential lifestyles ranging from Independent Living to Assisted Living to Memory Care, Skilled Nursing and other Special Care services by offering residents access to the residential living environment most appropriate for their needs now and in the future.
What is Independent Living?
Independent Living is for seniors who wish to live independently while benefiting from the advantages of an enhanced social, cultural and recreational lifestyle. With services like 12-hour restaurant fine dining, weekly housekeeping and flat linen laundry service, and scheduled transportation, Independent Living residents are free from the burden of home-maintenance concerns and have more time to enjoy the things they love. In addition, Independent Living residents do not require routine personal assistance and care services.
What is Assisted Living
Assisted Living is for seniors who need help with the activities of daily life, yet wish to remain as independent as possible. Assisted Living residents enjoy the same features and amenities as Independent Living residents, but with the added assistance of personal care, weekly personal laundry and three meals daily, including snacks. SRG communities’ personal assistance and care services include assistance with bathing, dressing, grooming, medication assistance, etc. Services can be increased or decreased over time, as needed.
What is Memory Care?
Memory Care offers specialized support for those with Alzheimer’s or related conditions. Senior Resource Group’s proprietary In Touch® Dementia care program assures the finest in assistance and sustaining care. Each member of Senior Resource Group’s professional staff understands the importance of personal respect and dignity, and works with loved ones and healthcare specialists to ensure the comfort, care and well-being of each and every resident. Memory Care offers supportive health and personal care services 24 hours a day within a specially designed, therapeutic residential setting.
What is Skilled Nursing?
Skilled Nursing Services provides care for a higher acuity level. When daily medical assistance is required our Skilled Nursing service may be the most appropriate housing option. HGRC can offer both short-term recovery after a surgery, and long-term care. We can provide 24-hour nursing care and in many cases rehabilitation services. Our services are resident-friendly as they shift their focus to one of ‘culture change’ and provide more customized services for longer-term residents.
What will happen when my health care needs change?
HGRC communities offer continuing care to address health and lifestyle changes as they occur. In all of our communities our service options (not all services offered at every HGRC) are offered as separate residential lifestyles within the same community. In our retirement communities, services are blended — meaning that even if your needs change, your home doesn’t have to. For instance, our Assisted Living program can provide personal care services within the comfort and privacy of your own residence.
Who decides when a resident must transfer to Assisted Living or Memory Care?
Your comfort and care is always our first priority. Our senior community’s care providers and management team will work together with you and your family to determine if and when a move may be necessary.
We are proud to have assembled an outstanding development team for HGRC.
Michael Bullis – President & CEO, Board of Directors
Sits on and is directly responsible to the BOD for HGRC company operations and profitability, pre-opening, sales and marketing, financial accounting and cost control, human resources and training.
Currently, President of Destination Properties, LLC. Michael brings first-hand management and design experience to the development team. As part of the operational design, Michael specializes in determination of property configuration, amenities, layout, decorating, marketing and staffing, and operations. It is his objective to maximize business opportunities through efficient operational design based on the needs of targeted customer markets. As President of Wrather Hotels and Wrather Management, Chief Operating Office of Friden Hotel Management President of Destination Properties Inc. he has operated some of the finest large and small hotels in the United States, including the Los Angeles Biltmore, Claremont Resort and Spa, Disneyland Hotel, Queen Mary and Canyon Golf Resort Michael, Registry Golf Resort and Spa in Fort Lauderdale, Fla., the Waterfront Hilton Beach Resort in Huntington Beach, CA. and the Davenport Hotel in Spokane, WA. Michael brings his unique style of successful, quality ‘hospitality’ leadership experience to HGRC.
Nick Hayhurst – Acquisitions & Development, Board of Directors
Nick sits on the BOD and has responsibility for property acquisitions and development.
Currently, Nick is President and CEO of Hallmark Development and Realty Corporation along with Tim Reuter, his partner. Nick is responsible for coordinating all aspects of the project including site locations, purchase negotiations, partnership development, financing, construction, prototype planning and design, permitting, franchising, and management. Hallmark specializes in market research, project cost calculations, financial projections and value estimates.
The Advisory Committee is a group of highly experienced professions that have offered their services to assist in the design of the physical and operational facilities, services and amenities, and generally every phase of the early development and positioning of HGRC. As you will see, the committee has extensive backgrounds to help guild us through the development phases to assure our success.
Roger Favero has been active in health care management for forty-five years. His many years of experience have included most if not all aspects of the health care industry. Starting in the clinical laboratory then moving to hospital administration followed by years in managed care industry management including preferred provider organization, health maintenance organizations.
He managed and developed a company, which examined the payments from insurers to providers for accuracy. More recently he owned and managed dental clinics and a
surgery center in Moscow, Russia. Currently he manages a company providing practice management services to clinically active physicians offering medical legal evaluations.
His many years of experience have cut across private and public for-profit companies, government and non-profit institutions.
Following is a brief summary of Roger’s positions and responsibilities:
ExamWorks, Inc. is the largest company in the United States providing physicians medical-legal practice management and services to the insurance and legal industries. IPO October 2010. Roger has been the General Manager of the business unit serving California, Nevada and Hawaii for nearly four years. The Sacramento unit was previously known as Benchmark Medical Consultants; Roger managed the company for the owner of Benchmark positioning it to be sold. ExamWorks purchased the company in August 2009. In fifteen months the company’s revenues have nearly doubled.
National Healthcare Exchange Inc. based in Sacramento was previously known as Doctor & Patient. The company is publicly held, NHCR. The company processes millions of medical claims through its system to insure payment correctness to physicians and hospitals from insurance companies. Roger, as the Chief Operating Officer, developed and managed a national sales organization from 1996 through 2002, contracting with health providers to examine their payments for correctness.
Russian American Dental Centers Inc., a California corporation with operations in Moscow, Russia and administration office in Limassol, Cyprus. RADC owned Dental Clinics and a Surgery Center in Moscow. Roger, an owner and General Manager, developed, built and managed the business from 1996 through 2004.
Foundation Health Corporation. A fortune 500 company based in Sacramento, California. A full service health insurance company offering HMO, PPO, and Indemnity Insurance products to employers, government agencies and individuals throughout the United States. FNC was a publicly held company.
Roger was the Senior Vice President responsible for the development of the provider networks (hospitals, doctors and ancillary) nationally from 1992 to 1996.
Occupational Urgent Care Health Inc. based in Sacramento, California was his first PPO focused primarily on the Workers’ Compensation and Group Health markets throughout the nation serving large employers (General Motors, etc.) and insurance companies (every major insurer). It was sold to Health Care Compare in 1992 and is owned by Coventry Health. Roger was the Senior Vice President responsible for the development of the provider networks (hospitals, doctors and ancillary) throughout the nation from 1986 to 1992
Valley Health Care Corporation, based in Sacramento, California was a hospital and health care system. The holding company owned the following entities; Methodist Hospital of Sacramento, Valley Health Enterprises, Wesley Health Foundation, Bruceville Corporation and Timberlake Corporation.
As Senior Vice President, Roger served the company from 1973 through 1986 in the following positions:
Valley Health Enterprises – Senior Vice Pres. and General Manager. Developed Medical Office Buildings, Surgery Center, and joint ventures with various partners.
Methodist Hospital – Vice Pres. of Administration focused on ancillary services and outpatient services.
Bruceville Corporation – Project Manager developed a 140 bed Skilled Nursing Facility and 30 bed Rehab Facility.
Timberlake Corporation – Chairman of the Board, Timberlake is a Durable Medical Equipment and Home Respiratory Services company.
Methodist Hospital – from 1973 through 1979 was the Chief Laboratory Technologists.
Sacramento Medical Center – Clinical Laboratory Supervisor
DCL Biomedical Inc – President of the Salt Lake City Company
St. Benedicts Hospital – Clinical Laboratory Supervisor
Col. Darc Keller
Darc Keller of Folsom, California is currently serving as Assistant Secretary for Healthcare Policy for the California Department of Corrections and Rehabilitation and State of California Military reserve with the rank of Colonel. He has over 30 years of experience as an executive in health care administration including; VP/Regional Manager of Medical Development International, Assistant State Surgeon for the California National Guard Headquarters, CEO for the Los Angeles Medical Association, VP of Medicaid contract management and Medicaid management for Foundation Health/Health Net, VP Sutter Health and Valley Health Care Corporation, Regional Manager for Partners National Health Plans, CEO Bannock Regional Medical Center, VP of Holy Cross Hospital and a health care consultant specializing in medical design.
AFFILATIONS AND HONORS
Vice Chair, Director, Physicians Clinical Laboratory
Board Member, Imaging Centers of Sacramento
President, Sacramento-Sierra Hospital Conference
Advisory Board, Health Service Administration, University of Southern California
Adjunct Faculty, University of Southern California, Idaho State University
Treasurer/Financial Officer, Center for Aids Research Education and Services
Rotary International-Rotary Club, Sacramento
Boy Scouts of America
America Trauma Society
Accredited Executive in Personnel, ASPA
Executive Committee, VHA Mountain States
Trustee Healthcare Forum
Idaho Hospital Association, Chair, Southeast Council
Outstanding Young Men of America
M.S. HealthCare Administration, University Notre Dame; B.S. University of Utah
Medical Advisor to Joint Staff and Assistant State Surgeon, California National Guard, United States Air Force, USAF Reserve, HQ USAF Office of the Surgeon General, Consultant-Surgeon General’s Tactical Action Team, Bolling AFB, Washington, D.C.
Leticia P. Perez,
One of the founders and owners of LTP Carepro Inc. and has served as its president and chief executive officer since its conception in 1999. Leticia has also served as its director engaged in developing and over-seeing clinical operations, sales and marketing, quality assurance and improvement, risk management and regulatory compliance in assisted living, memory care, and skilled nursing facilities. LTP Carepro, Inc. owns and operates seven sites in the San Francisco/Oakland area.
Leticia is also co-owner and co-founder of Health Care Professional Training Centers, established in 2007, which is certified by the state of California and specializes in the education, training and certification of nursing assistants and licensed vocational nurses and has a bridge program for Bachelor of Science Degrees in Nursing.
Leticia has worked in the acute care industry for seven years as a step down clinical nurse. She has a Bachelors Degree in Psychology and in Nursing and is California certified as an Administrator for Assisted Living and Skilled Nursing facilities.
Healthcare Medical Billing
Grace Parker, President of HMBFS, graduated as a Medical Billing Specialist with Honors at Heald Business College in 1994. She worked as a Business Office Manager in a Skilled Nursing Facility/LTC Corporations and has received an achievement award as an outstanding Medical Biller in the Top 10 Highest Medical Biller Collector in a Skilled Nursing Facility as an indication of her commitment to excellence. She specialized in different aspects of Healthcare industries: an Operational Manager for Business Office, Financial Accounting and acted as a Consultant to different Skilled Nursing Facilities.
HMBFS was started in 2003 in the basement of Grace D. Parker's residence. Three years later, HMBFS moved to its prior location at 1654 B Street, Hayward, CA 94541-3020. In 2009 HMBFS took over an additional suite to double its size and moved to its current location at 22320 Foothill Blvd., Suite 510, Hayward, CA 94541-2719.
With a staff of 25, HMBFS is one of the largest independent outsource medical billing services and consultant in the State of California. HMBFS has clients that range from Healthcare (SNF/LTC), Acute Hospital corporations, non-profit organizations, private owned facilities and solo practices to large multi-physician groups located all over the state of California.
HMBFS is a member of California Association of Health Facilities (CAHF).
Seniors housing market fundamentals are expected to remain relatively healthy in the foreseeable future, as the U.S. population continues to age and tighter lending standards hinder development activity going forward. Rising construction in recent quarters has caused a temporary decrease in occupancy rates, though all segments of the seniors housing market remain strong compared to historical averages and other real estate sectors.
Slower economic growth and the housing market downturn have also contributed to reduced occupancy levels this year, albeit to a limited degree, as slower home sales and declining prices may be preventing some seniors from moving into independent living units. Seniors housing demand, however, is generally driven by the need for assistance or health care services, making it less sensitive to economic shifts.
During the longer term, demand for seniors housing units will rise substantially, as the leading edge of the baby boom generation turned 60 years old just last year. In addition, Americans are living longer. To accommodate the expanding needs of seniors, developers are building higher-end, amenity-rich properties that offer a wider range of services.
The seniors housing investment market has continued to transform from a niche market to a more mainstream property sector, appealing to a broader range of real estate investors. TICs, private equity groups and foreign investors have all increased their stakes in the market, attracted by above-average returns and the potential for significant growth in the future.
Cap rates have compressed as a result of increased competition, but they remain favorable compared to other property sectors, particularly apartments. Cap rates are expected to rise modestly during the next year due to tighter lending conditions, which include larger down payments requirements and more conservative underwriting based on actual NOIs, instead of pro forma.
Risks to this outlook include the potential for higher interest rates or another disruption to capital markets, which investors who are waiting on the sidelines should consider. After losing out on some larger deals to private equity firms in recent years, lower-leverage institutional investors are likely to take advantage of the opportunity to pick up quality properties this year.
At this point, smaller private investors are still in the game, with considerable amounts of appreciation-based equity in the real estate market helping to compensate for lower loan-to-value requirements. In addition, capital is available for solid deals, and all-in borrowing rates are largely back in line with those available in early July.
New development in the Assisted Living (AL) sector remains limited, especially when compared to the significant amount of building that took place in the latter half of the 1990s. There are currently 3,180 units under way, the lowest number of units in the past three years. If all units come online, inventory will rise by 1.8%, following a 2.2% increase last year.
Despite the slowdown in construction, the occupancy rate has decreased by 30 basis points to 95.5% during the past 12 months due to a modest decline in demand. Nonetheless, occupancy levels in the AL sector remain tight enough to support revenue growth. The median monthly revenue is $3,290 per occupied unit, up 6.1% on a year-over-year basis. A large share of AL properties feature other types of units, such as DC or even hospice units, which can generate additional revenue but also require more highly skilled staff.
Some properties are renting units to outside hospice organizations, making it possible to offer specialized care without adding to management responsibilities or hiring new staff. The AL segment accounts for the majority of transactions recorded in the seniors housing investment market. Prices in the sector have increased moderately to date in 2007, with the median price up approximately 4% to $138,000 per unit.
Cap rates have declined 60 basis points during the past 12 months and are currently hovering in the high-6% range for newer, high-quality assets with strong operational performance to the mid-9% range for lesser-quality assets. The AL sector has experienced a significant amount of consolidation during the past few years, and several large portfolios have traded; however, demand for individual assets is also healthy. Smaller private investors with seniors housing experience are expected to find more single-facility opportunities in the market this year as increased lender scrutiny limits the buyer pool.
On a year-over-year basis, occupancy in the IL sector was down 70 basis points as of mid-2007 due to increased development activity; however, at more than 96 percent, the market remained tight enough to support rent growth. The median monthly revenue increased more than 4% during the past year to $2,261 per occupied unit.
Independent Living (IL) market fundamentals remain healthy, with overall occupancy currently hovering at more than 96%, in spite of a 70-basis point decrease during the past year. The decline in median IL occupancy is due in large part to new supply, which has increased in recent quarters. Overall, there are currently more than 10,500 IL units under construction, which will increase existing inventory by 4.3% once all projects are completed. Despite a decline in occupancy, rents in the IL market have continued to rise, primarily due to the addition of new, higher-end properties. Rising rents during the past year have supported a 4.2% increase in monthly revenue per occupied unit, similar to the growth registered during the previous 12-month period.
The median monthly revenue is currently $2,261 per occupied unit. Cap rates in the IL sector are down 20 basis points from one year ago; however, the average is in the high-7% range, which is very attractive compared to other property sectors, particularly apartments.
Competition for listed properties has resulted in considerable price appreciation. The median price in the IL sector has increased by almost 10% during the past 12 months to $158,000 per unit, after rising 2 percent in 2006. AL development has declined slightly from one year ago. Occupancy edged down 30 basis points from mid-2006 to mid-2007 but remains healthy at approximately 95.5%. Rising rents in the sector helped to support revenue growth of more than 6% during the same period, pushing the median price per occupied unit to $3,290 per month.
Dementia Care (DC) facilities, which specialize in neuro-degenerative conditions, such as Alzheimer's and Lou Gehrig's disease, represent a small but growing share of the market. Developers are picking up the pace of construction due to rising demand among the aging population. There are currently 1,100 units under way, up 40 percent from one year ago and representing a 3.2% increase in DC inventory. Elevated development activity has resulted in a modest 40 basis point decline in occupancy during the past year to 96.2%. Across the major U.S. markets, the median monthly revenue has increased 2.8% to $4,800 per occupied unit during the past 12 months. Consistent revenue growth, tight occupancy levels and expectations for future increases in demand have kept investor interest in DC properties elevated. Currently, DC properties are trading at cap rates between 8% and 11%, dependent upon property age, quality and location. Most DC units are part of seniors housing properties offering other levels of care, as there are only a limited number of stand-alone facilities. Nearly 88% DC units are for profit, compared with 58% of SN units and 81% of AL faculties. On average, DC properties are less than 10 years old, and more than two-thirds are owned by chains, compared with just 58% of SN facilities.
Skilled Nursing (SN): Development activity in the SN sector has decreased during the past year. The midyear 2007 occupancy rate is currently hovering slightly below 94%, nearly equivalent to one year ago. Monthly revenues increased 5.7% to a median price of $5,630 per occupied bed during the most recent 12-month period.
Skilled Nursing (SN) development is limited, as builders have continued to scale back construction activity since 2005, keeping occupancy in a healthy range. There are currently 2,600 beds under construction, nearly 1,000 less than one year ago. As of midyear, occupancy in the SN segment was at almost 94%, similar to the rate one year earlier. Solid demand for SN units has supported a 5.7% increase in revenues during the past year, with the median rising to $5,630 per occupied bed.
Consolidation in the SN sector has resulted in improved efficiencies and greater profitability for some of the larger owners in the industry. Prices for SN properties have increased 5.5% during the past 12 months to a median of $50,000 per bed. Higher returns have attracted a broader range of investors, including institutions seeking newer, high-quality properties with solid cash flows
Additionally, the average acquisition cost of an existing SN facility is generally less than the average cost to build today. Cap rates in the SN market currently average from the low-11% to mid-14% range, which are nearly twice the average cap rates in core property sectors.
Higher returns reflect the increased level of risk, however, as approximately 78% of SN beds are paid for by Medicaid or Medicare; any changes to reimbursement guidelines or limits can therefore significantly impact revenues.
BY GARY LUCAS, MANAGING DIRECTOR, MARCUS & MILLICHAP RE INVESTMENT SERVICES' NATIONAL SENIORS HOUSING GROUP
Colliers International Exec Sees Major Growth Ahead for Seniors Housing Market
Colliers Joins Industry Move to Launch or Expand Seniors Housing Practices as Values Hit Bottom Amid Shrinking Supply, Creating Buy Opportunities For Investors
By Randyl Drummer
July 7, 2010
With large numbers of Baby Boomers starting to reach retirement age, the demographics have never been more favorable for expected increases in demand for senior housing and care, and both areas are becoming increasingly important niches for investors and commercial real estate companies. Colliers International has become the newest player to enter the space, recently announcing the formation of a Seniors Housing Practice Group under the direction of Mark Silver as its head.
Silver, operating out of Colliers' New York office as national director, will oversee the specialty group and leverage Colliers International’s various capabilities to serve senior housing sector clients and build the seniors practice nationally. He served most recently as managing director and co-head of the National Seniors Housing Group at Jones Lang LaSalle and previously served at Cushman & Wakefield.
"We’re looking for owners of skilled nursing, independent living, assisted living facilities, continuing care retirement communities, dementia units, surgical centers, medical office buildings and hospital systems who hope to bring their facilities or portfolios to the market," Silver tells CoStar. "There are investors on the sidelines holding a tremendous amount of cash who are ready, willing and able to purchase."
Finding ready and willing sellers may be a different story.
"The credit market has changed the terms on how investors finance it, but the cash and demand are there. The rub is this: Owners are still not currently willing to sell at the bottom of the market at depressed pricing for many reasons, not to mention they’re still getting decent reimbursements from the government."
The 18-year real estate veteran’s recent assignments include the sale of skilled nursing and assisted living facilities in New York, New Jersey, Massachusetts, and Connecticut and medical office buildings in New York and Texas. He has also served as a development and financing consultant for projects in Connecticut, Florida, and Long Island. Here are highlights of CoStar's recent conversation with Silver.
CoStar Advisor: Why did Colliers decide to form a seniors housing practice?
Mark Silver: Simply because of the demographics. Colliers saw a tremendous opportunity to be in this space. Colliers has a very strong health care valuation group and we also have a strong health care group, probably the largest in the industry, over 100 professionals. The component that was missing was seniors housing.
CoStar: How do the demographics today favor the seniors housing investor?
Silver: It’s a very strong time for investors, REITs and seniors housing owners to buy, sell and develop properties. Over the next 20 years, the proportion of the population age 65 and over and age 80 and over, are projected to increase dramatically. The percentage of Americans age 65 and over is projected to grow from 12.4%, or 35 million people in 2000, to 19.6%, or over 71 million, in 2030. For ages 80 and over, the numbers will go from 9.3 million in 2000 to 19.5 million in 2030.
People are living longer and healthier lives. And frankly, they’re too important politically and culturally and financially to the U.S. for the government not to continue supporting them. Medicare will surpass Social Security in total annual cost over the next 20 years. Medicare now costs taxpayers about $230 billion per year, or 3.1% of GDP. That will increase dramatically over the next 20 years as the Baby Boomers pass the age of 75.
CoStar: How does that translate into demand for the seniors housing sector, and what’s the outlook?
Silver: There are currently not enough (senior housing) beds in the U.S. to support the growing number of elderly people. However, the Boomers born between 1946 and 1960 -- that’s 25% of the population -- are not of age yet to peak out. I used to say the seniors housing sector was recession-proof. But the Great Recession proved that wrong. Although senior housing valuations have come down, they haven’t dropped as much as other sectors. The federal government is continuing to support these facilities through Medicare reimbursements.
CoStar: How does the current senior care facilities market compare with the market 15 or 20 years ago?
Silver: The business has evolved over the years to a very high quality for patients. The quality of care is dramatically better. Doctors and nurses are providing more services on-site within the facilities. It’s evolving into a very culturally accepted form. The senior housing industry is going through a slow transition. Although 75% of the industry is still owned by ‘mom and pops’ or private families, REITs, investment banks, private equity firms and hedge funds have seen the opportunity and are buying into it. They're funding a lot of the larger seniors housing companies that own the other 25% of the market. I believe the smaller and regional players will eventually sell out.
CoStar: The fundamentals remain tough but at the same time, there’s already a seniors housing undersupply. When are we going to see construction again and new product hitting the market?
Silver: Brand-new development deals are very, very difficult today because of the financing terms. Banks want investors to have skin in the game and for the cash to start coming in right away. But once the economy starts loosening up and the job market returns, we’ll see new development come back.
Inside Medicine: Hospital is discharging you but you can't go home
By Dr. Michael Wilkes
Published: Sunday, Apr. 10, 2011 - 12:00 am | Page 15I
Regularly, at hospitals all over the Unites States, patients' relatives are told: "The doctor will need to discharge your relative from the hospital in the next day or two. You'll need to find a place for your relative to live since she clearly can't stay at her home by herself any longer."
A family gets the news on a Friday that the medical team must discharge the patient Monday morning. There's panic and an overwhelming feeling of impending doom.
The situation is extremely unpleasant for the medical team as well.
Gone are the days when discharge decisions were exclusively left to the doctor. Now these types of discharge decisions are routinely made by "hospital discharge planners" who work for the hospital and have their eyes primarily on the hospital's financial bottom line.
Often, their goal is not to decide what's best for the patient or family, but what's most profitable for the hospital, considering how much the hospital will be reimbursed.
Increasingly, hospitals are reimbursed a fixed amount of money based on the admitting diagnosis (congestive heart failure, fractured hip, etc.). The longer the patient stays in the hospital, the less money the hospital makes.
Announcement of a pending discharge can leave patients and their families wondering how they can do this.
What are the options? How much will it cost? What if the hospitalized relative doesn't want to go? How can I bring them home to my house?
A recent issue of the medical journal JAMA described a couple in their late 70's who had survived a car crash. The husband was left in a coma and needed to go to a skilled nursing home. The wife broke her ankle.
She was unable to walk. Doctors felt she needed to spend weeks in a rehabilitation hospital receiving physical therapy. She wanted to go home, but it turned out she lived in a house with stairs to the bedrooms. Her children also lived in homes with staircases. She was unable to navigate stairs, prepare her meals, or even shower without assistance.
Her family had no idea of the placement options available to her or the benefits of each option.
The hospital social worker was able to offer advice on where she could go on Monday after the hospital discharged her, but it wasn't the social worker's job to offer assistance on long-term planning.
The social worker explained that federal Medicare offers limited coverage for rehabilitation services (called post acute care), but that coverage quickly runs out. Forty-five percent of Medicare patients leave the hospital and go to a rehabilitation facility.
Medicare does not offer coverage for long-term care like that required by this couple.
For the couple in this article, there were only two options – pay for care themselves (either directly or through the early purchase of extremely expensive long-term health insurance) or spend down to the point of poverty and then state Medi-Cal would pay for nursing home care.
But they were warned: The nursing home may not be the facility of their choice or even one near relatives.
Most physicians are not experts on insurance coverage, rehabilitation, or nursing home care. Given the rapidly aging population, however, it is high time doctors learn the basics so we can advocate for our patients.
This is important as insurance companies, hospitals and nursing homes try to skim off patients who have money and can pay their own way, and dump those who can't afford the care.
Doctors need to make sure patients and their families engage in a process of shared decision-making in which the facts are presented in a clear, understandable, honest and transparent fashion. It is the doctor who has the best ability to advocate on the patient's behalf.
The health care team knows that the more times the person is transferred from place to place, the more difficult it is provide good medical care and the more opportunities there are for mistakes.
Discharge is stressful for patient and family, and where a person ends up residing can have important implications on both the length of their life and the quality of that life.
Research shows that the most dangerous time in a person's medical care is during transitions from place to place. The goal is to minimize such transfers and maximize quality of life.
This couple were given a list of nursing homes that had open beds rather than a list of recommendations as to where they would receive the best care.
When the family voiced frustration, the doctor suggested they contact a new breed of health professional called a "care manager." These experts can have a variety of backgrounds, although many seem to be social workers or nurses.
Families must pay them directly at rates of about $80 an hour, but they are experts at helping to determine what is in the patient's best interest.
No matter what is done, there are some key questions to ask the doctor, social worker or care manager:
• What are the goals of care that we should hope for?
• What placement options are available?
• How well will each option achieve the desired goal?
• Are there risks associated with any of the options?
• Who will provide the medical care to my relative?
• How long will they stay at the facility?
• What are the costs and will insurance cover any of them?
Once you find a facility that looks good, the next step is to understand its staffing, philosophy and user friendliness. Questions to ask might include:
• How far away is it, and will family and friends be inclined to visit?
• Is there a religious or other philosophy that is acceptable?
• Are there rules that will keep the patient from doing things he values?
• What is known about the institution's track record with quality of care?
• Will my hospital doctor talk directly to their doctor to minimize confusion at the time of transfer?
The couple from the motor vehicle accident were rejected by several nursing homes. It took many calls, and in the end they needed to go to separate facilities, meaning that at the end of their lives they couldn't be together.
In many other developed countries there is social insurance that provides for long-term care.
The best coverage is provided by Japan and Germany, but the Scandinavian countries, the United Kingdom, France and the Netherlands all provide publicly funded long-term care.
In the Untied States, we can't even agree to have government pay for basic health care. In our current anti-government environment, it would be unthinkable to suggest government provide long-term care to protect our elderly. Certainly, as a society we can do much better than we are currently doing for our senior citizens.
© Copyright The Sacramento Bee. All rights reserved.
Michael Wilkes, M.D., is a professor of medicine at the University of California, Davis. Reach him at firstname.lastname@example.org.
Read more: http://www.sacbee.com/2011/04/10/3536795/hospital-is-discharging-you-but.html
ASSISTED LIVING OCCUPANCY RISES, SENIORS HOUSING RENT GROWTH SLOWS
NIC MAP Data Also Shows Increased Construction Starts
Annapolis, Md. - Occupancy rates fell for independent living and rose for assisted living in the second quarter of 2010, while the pace of rent growth slowed markedly, according to NIC MAP, a data and analysis service of the National Investment Center for the Seniors Housing & Care Industry (NIC). The data also showed the first rise in trailing-twelve month (TTM) construction starts since the first quarter of 2009 for seniors housing (both independent and assisted living properties) due to construction beginning on several entrance fee CCRCs.
The average occupancy rate for assisted living properties in 2Q10 was 88.3%, up from 87.8% in 1Q10 and a year ago, in 2Q09. Conversely, occupancy rates fell to 87.4% for independent living properties during the second quarter of 2010, down from 87.5% in 1Q10 and 88.0% a year ago. "Although the occupancy rate for independent living is still declining, there are some signs that it may be at or nearing its cyclical bottom," said Michael Hargrave, vice president - NIC MAP. "For example, during the last year the independent living occupancy rate is down 0.6 percentage points, compared to the previous four quarters when it was averaging a decline of 1.85 percentage points."
The skilled nursing occupancy rate was 88.6% in 2Q10, down from 88.9% in 1Q10 and 89.2% in 2Q09. "Skilled nursing trends continue to show both declining absorption and declining inventory growth," said Hargrave.
One of the key drivers of the recent stabilization in occupancy rates appears to be a return to positive absorption. Annual absorption, which was 0.0% in 2Q09, now stands at 1.7% in 2Q10 for seniors housing properties.
Rent growth for seniors housing in the second quarter of 2010 was still positive, although it slowed markedly compared to previous quarters. The average monthly rent (AMR) per unit was $2,705 for independent living and $3,525 for assisted living. For both types of properties, the year over year rent growth was 0.7%. In comparison, the year over year rent growth in the first quarter of 2010 was 1.6% for independent living and 1.4% for assisted living.
"This reflects an increase in the percentage of operators who are telling us that they are adjusting their market rents," said Hargrave. "In the second quarter of 2009, the percentage of properties that reported a decline in year over year rents was 9.1%. Now, a year later, that number is 15.7%."
In contrast, there was no slowdown in the growth rate for private pay AMR for skilled nursing in 2Q10. For the second quarter of 2010, the AMR for skilled nursing was $7,979, compared to $7,734 in 2Q09.
For independent living, TTM construction activity was 1.1% of existing inventory in 2Q10, compared to 0.9% in 1Q10 and 1.0% a year ago. TTM construction activity was also 1.1% in 2Q10 for assisted living, compared to 0.9% in 1Q10 and 1.3% in 2Q09.
"This quarter we saw an increase in the level of construction starts for seniors housing," said Hargrave. "The 1,659 seniors housing units that were started in the second quarter of 2010 represent a 52% increase over the average number of starts per quarter during the previous four quarters. However, a majority (56%) of the starts are due to several not-for-profit tax exempt bond financings which had been delayed by the frozen credit market for tax exempt bond financing."
For skilled nursing, TTM construction activity was 0.3% in 2Q10, which was the same as the previous quarter and a year ago in 2Q09.