Archive for the ‘Seniors' Housing’ Category

90 is the new 80

Tuesday, November 29th, 2011

In case you haven’t been keeping up, 90 is the new 80 or more precisely, 90 is the new 85. A recent report from the US Census Bureau (I know what you are thinking—why doesn’t she ever reference Canadian data in her posts? Because there isn’t any is the short answer to that question.) points out that among the seniors population as a whole, the 90+ group has been growing the most rapidly. When all of the baby boomers reach the age of 85 (in 2050), 2% of the US population will be 90+ which is pretty amazing if you stop to think about it. That is a lot of 90 year olds.

What are today’s 90 year olds like?

• Women outnumber men 3 to 1

• 6% of the women are married; 43% of the men (which is one of the big reasons that the vast majority of the residents of seniors housing communities are women—not only do they live longer, they are much more likely to be alone.)

• The likelihood of living in a nursing home rises from 20% between 90 and 94 to 31% between 95 and 99 to 38% for those over 100. These ratios are probably lower than what many people would expect. I usually quote a ratio of 35% of the population over the age of 85 living in nursing homes in Canada but either my estimate is wrong or there is a much higher incidence of institutionalization in Canada. We will try and check this out.

• Not surprisingly, people living in nursing homes have more disabilities than people living in the community although overall, the differences aren’t huge—98% of nursing home residents have disabilities (I don’t know why it isn’t 100%) compared to 81% of people living in the community. But there are major differences in a couple of categories—trouble remembering (73% versus 30%) and needing help with activities of daily living such as bathing and dressing (85% versus 35%).

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US Market Improving (slowly)

Friday, November 18th, 2011

I know I do go on about the US market, but I find it endlessly fascinating. Of course that’s partly because there is so much data on the US market. We have so little data in Canada that it is usually quite difficult to figure out what’s going on.

The chart below, courtesy of NIC, shows a steady improvement in occupancy levels in independent living (IL) and assisted living (AL) communities in the US since the seniors markets bottomed out in the first quarter of 2010. It’s interesting though, or maybe depressing is the better word, to think about how long and how deep the slide has been, really since the latter part of 2006. Not only that, over the same period of time the 75+ population in the US increased by over 800,000 people. To put that number in perspective, in Canada there are a total of just over two million people over the age of 75.

US Occupancy Rates

So while things are getting better, they are still a long way from good, thanks largely to the still extremely sluggish US housing market.

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Transforming Institutional Long Term Care

Tuesday, November 8th, 2011

To most people in the field “institutional long term care” is a redundancy. If it’s long term care, it’s institutional.

But a movement in the US, called the Green House Project, is aiming to change all that. And it’s not green as in sustainability, it’s green as in grass, plants, gardens, the outdoors.

Here is a brief description from the web site:

‘The Green House residence is designed to be a home for six to ten elders. It blends architecturally with neighboring homes, includes vibrant outdoor space, and utilizes aesthetically appealing interior features. Each elder has a private room or unit with a private bathroom. Elders’ rooms receive high levels of sunlight and are situated around the hearth, an open kitchen and dining area. While adhering to all codes required by regulations, Green House homes look and feel like a home, and contain few medical signposts.’

To anyone familiar with modern care facilities in Canada and their associated regulatory frameworks, such a model seems impossible. But lots of research shows that not only is the Green House Project possible, it delivers better outcomes than traditional skilled nursing facilities and it doesn’t require any more staff resources. Many green home communities are now operating throughout the US although I have never heard of one in Canada, not surprisingly. It took us 10 years to catch up to the US in the assisted living sector.

We have lots of questions about this model as you probably do too. My first question is: how frail is too frail, physically and mentally, for a Green House client? We’ll find out and let you know in future posts.

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Construction activity down but prices at high end up

Friday, November 4th, 2011

The National Real Estate Investor just reported that 14,942 units of private pay service-enriched and skilled nursing facility beds are under construction in the US. That’s up modestly year-over-year although well below pre-recession levels. But it’s way below the peak of 1998, when an astonishing 57,800 similar units were under construction. Of course a lot of those projects eventually went broke thanks to over-supply in many markets. I wonder what the Canadian situation is? Sadly, no one has any idea.

But prices for high end US projects have been climbing steadily since the recession. Reports from NIC and Real Capital Analytics indicate that in the first quarter of 2008, the top 25 percent of project prices was about $169,000 per unit. That number fell to about $101,000 a unit by the fourth quarter of 2009. Prices for the properties in the top quartile have increased since then to $170,141 per unit. That’s a big jump.

One of the transactions highlighted in the report is in Raleigh North Carolina. Prudential Real Estate Investors sold the project in 2004 for $29 million and just bought it back for $53 million from the same company they sold it to. Some improvements were made in the meantime (eg 14 cottages added) but it sounds on the surface like a very good deal for the interim owner.

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Lumina Group Newsletter Imminent!

Tuesday, October 25th, 2011

It’s been a long time coming (also one reason why there’s been a little bit of a drop off in my posting) but we will be in a position very shortly to launch our newsletter, called, perhaps a little unimaginatively, Industry Insights.

We have actually produced the first issue, focused on affordability in service-enriched housing environments. My colleague Carol Omstead and I have endless debates about this issue, focused on just how important affordability is in the grand scheme of things. That may sound ridiculous at first blush but remember that the private pay service-enriched sector appeals to a very small proportion of its target market—somewhere between 5% and 10% in most market areas. A very large proportion of the other 90% can afford what we are offering so to what extent will a more affordable product widen our target market? I think that is a very good question.

The first issue also lists 24 very exciting topics we will be addressing in future issues, ranging from operating expense ratios (how are YOU doing relative to industry norms?), to acquisition versus new construction analysis, to turnaround strategies for underperforming projects. And everything in between!

The details of how to get on the distribution list for the newsletter will be available within a week or two.

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Numbers: Canada vs. US Nursing Homes

Tuesday, August 16th, 2011

A recent study published by Brown University (July 2011 edition of Health Affairs) shows that between 1999 and 2008 the nursing home population in the US shrank by just over 6% while at the same time the population over the age of 70 increased by just over 8%. The shift is attributed largely to the growth of alternatives such as assisted living.

Here’s another interesting thing to note—in Canada, there were 250,000 nursing home residents in 2008/2009. In the US in the same year there were 1.2 million. Using the standard 10 to 1 ratio suggests that there are twice as many people in Canada in nursing homes as there are in the US on a per capita basis. That is undoubtedly due in large part to the lack of Canadian alternatives, assisted living in particular. Assisted living in the US is almost entirely a private pay phenomenon and when it comes to care, no matter how light, Canadians do not like to pay for it. As a result, the private pay assisted living market in Canada is a very thin one.

On the surface, the impact of twice as many nursing home residents and very few assisted living residents would seem to result in much higher public expenditures in Canada for the elderly compared to the US, particularly in light of recent dramatic cuts to US Medicare and Medicaid budgets (11% reductions). And maybe that is as it should be, although it seems inevitable that Canadian public expenditures on the elderly are going to be spread much more thinly in the future than they are now.

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The Largest Gated Retirement Community in the World

Tuesday, August 9th, 2011

I have been engaging in a bout of summer cleaning—trying to create breathing space in my usually very cluttered office. I can’t remember what clutter means from a personality perspective but I am feeling very smug about the order I have brought to a certain amount of chaos.

Part of the process involved going through piles of paper I always meant to get back to. One item in the pile was the Winter 2009 edition of Public Policy & Aging Report, which contains an article about The Villages in Florida, the largest gated retirement community in the world. It must also be the largest ungated retirement community in the world—it spans three counties, two zip codes and more than 20,000 acres. The dozens of villages are home to a total of more than 75,000 people (as of Winter 2009) with room for 35,000 more. Sun City Arizona in contrast is home to only 40,000 people.

To keep those 75,000 people amused, The Villages offers two downtowns, several shopping centres, dozens of pools and shopping centres, hundreds of hobby and affinity clubs, and 36 golf courses. How could they fit all that into 20,000 acres? 20,000 acres is just over 31 square miles so I guess it’s easy.

If all this sounds faintly horrifying to you, the same thought occurred to the author of the article (Andrew Blechman) so he set out to see for himself. What he found went beyond faint horror—his article makes The Villages sound like something right out of science fiction or George Orwell or both. He wrote a book about The Villages, called Leisureville: Adventures in America’s Retirement Utopias.

It all reminded me a bit of a local “utopia,” Arbutus Ridge on Vancouver Island. I recently tried to tour Arbutus Ridge when I was doing some work nearby. Not possible—you have to get written permission in advance from a higher authority than the security guard at the gate. The very first page of the Arbutus Ridge web site contains the following sentence, in bold.

A key attraction of our development is the security provided by a gated community design and our “24/7/365” security staff.

I am probably sounding a bit judgemental about all this. After all we are constantly saying in the industry that what we need is choice so that there is something for everyone. But withdrawal from civil society may go beyond the pale.

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The 80/20 Rule as It Applies to Seniors Housing

Friday, August 5th, 2011

I have always wanted to improve my time management skills—who doesn’t? So I bought a couple of books, The 80/20 Principle by Richard Koch being one of them. The 80/20 Principle basically says that 80% of your outputs result from 20% of your inputs. The principle works in all kinds of ways, even in the criminal word. Apparently 80% of the crimes are committed by 20% of the criminals.

(In the US the 80/20 rule also refers to the Federal Fair Housing Act as it applies to communities that are designated for seniors—at least 80% of the units must be occupied by someone over the mandated age, 55 or 62 or whatever.)

So all this got me thinking about the world of service-enriched seniors’ housing and how the rule could be applied there. Here are some possibilities:

• 80% of resident satisfaction is attributable to 20% of operational efforts.
• 80% of food satisfaction is due to 20% of menu items.
• 80% of profits is due to 20% of effort.
• 80% of positive word-of-mouth marketing comes from 20% of residents.
• 80% of complaints come from 20% of residents.
• 80% of internal productivity advances are suggested by 20% of employees.
• 80% of new residents come from 20% of marketing efforts.

Operators who are able to figure out the 80/20 distribution in their communities are in a position to make a huge contribution to resident satisfaction as well as to the bottom line. After all, if the principle works in the world of crime, it must certainly work in the world of seniors’ housing.

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Primary Market Areas

Tuesday, July 26th, 2011

Historically, market areas in the seniors’ housing industry in Canada have been defined for the service enriched segment of the market. Primary market areas (PMAs) are considered to be those areas from which 75-80% of the residents of a project will come. Sometimes radiuses are used, 10 miles being a popular one as in “This is a 10 mile business”. Occasionally the 10 mile rule even works but it is a risky thing to hang your financing on. Bridges, municipal boundaries, socio-economic neighborhood characteristics, competing projects—any of these, plus dozens of other factors, can and do affect the determination of primary and secondary market areas.

And of course there is the big one, the location of children. From the perspective of market analysis it would be comforting to think that the location of children is a neutral factor when it comes to estimating demand from primary and secondary market areas because it is a difficult factor to estimate. But it is far from neutral. It may even be as important as the presence of seniors themselves in a market area. Job-generating market areas will attract more seniors than they lose, which is why Alberta attracts and retains more people over the age of 65 than BC (strange but true).

As is almost always the case in Canada, there is very little hard data indicating whether the definition of primary market areas has any basis in fact at all, beyond the research Lumina has done with the BC Senior Living Association. Operators know where their residents come from of course but there has been no systematic collection and analysis of data that shows how reliable the 75-80% estimate really is.

But things are different in the US, where the industry sees the value of research and actually spends money on it! Wow – what a concept. The most recent NIC Insider Newsletter references a 2003 study that found that 22.5% of a large sample of new residents moving to CCRCs (Continuing Care Retirement Communities) had moved from farther than 15 miles away. Results of this study have been supported, in a way, by a just-published Reuters/University of Michigan survey. Of respondents to that survey aged 70+, 20.4% said that where they live was not convenient from the perspective of where their children live. NIC sees this as supporting the results of the 2003 survey and I suppose in a very indirect way it does.

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Interprovincial Migration to BC (no no it’s not boring!)

Tuesday, July 12th, 2011

Readers of my book and this blog will know that I have what is probably an unhealthy, or at least an unnatural, interest in migration patterns. But anyone who is interested in seniors housing markets, or indeed any other kind of housing market, should pay close attention to who is moving where and for what reason. We just finished a market analysis in Saskatoon. Interprovincial and international migration to Saskatoon has been positive (ie in-migration has exceeded out-migration) for about 4 years now, after at least 40 years of more people leaving than moving in. The impact of that on almost every aspect of life in Saskatoon has been, if not quite profound, certainly noticeable.

Which, then brings me to BC. Immigration from other countries to BC is fairly constant from one year to the next. And almost all immigrants settle in the Lower Mainland, so it is a factor of less interest to other communities. Interprovincial migration on the other hand is hugely variable and affects communities throughout the province. Contrary to the urban myth that BC is a giant magnet for retirees, almost all interprovincial migration depends on economic conditions in BC compared to our eastern neighbours, particularly Alberta.

It sounds simplistic but it really isn’t—when interprovincial migration to BC is positive, things are good. When it’s negative, things are bad.

That’s why it was alarming to see in BC Stat’s First Quarter 2011report on interprovincial migration that for the first time in 9 years, quarterly migration has been negative. The report cautions that numbers are preliminary but states: “we can be reasonably assured that interprovincial migration to BC appears to be trending down”.

That is a sobering thought. In future posts we will talk about the sub-provincial impacts of these changes. As readers of my book know, great information on inter-, intra- and international migration trends is available from your friends at the Canada Revenue Agency. Your friends at Lumina Services pay close attention to this information in our unceasing search for the truth.

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