Posts Tagged ‘Housing Development’

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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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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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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All you condo-sceptics out there take note:

Friday, June 10th, 2011

Some of you may have seen the inaugural copy of the Westbridge Group Valuation Partner/Lumina Services newsletter. If you haven’t seen it, it is pretty amazing even if I do say so myself. One of the articles discusses the question of condos with services—whether they make any sense from an investment point of view. Many people argue that they don’t because the resale market is so much smaller than the market for a conventional condo. The article concludes that in the case of the two projects analyzed—Tapestry at O’Keefe in Vancouver and Mayfair Gardens in Port Coquitlam—price appreciation did in fact occur, although at a somewhat reduced rate compared to the standard condo market.

I just happened to notice a unit at Tapestry listed for sale in yesterday’s Vancouver Sun. It’s a large two bedroom unit—1,236 square feet in “picture perfect condition” (according to the realtor), list price $728,000. I immediately referred to our data base on service-enriched condos, available for a very modest price from the estimable Landcor folks. The same unit has sold twice before, once when the project opened in 2003 for $405,421 and again eight months later in February 2004 for $470,000.

If the unit sells for its list price, that represents an 8% per annum increase in value since 2004. Over the same time period, the price of the benchmark apartment condo in Vancouver Westside increased by an identical 8% per annum. So no reduction at all for the mandatory service package, assuming the unit sells as listed of course. We will keep our eyes open and let you know what happens in future posts.

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Housing Markets

Tuesday, March 29th, 2011

Here in Canada and especially in BC we have been subject to numerous warnings that our housing markets are overheated and about to collapse, much as they have in the US. All of us in the seniors’ housing industry are very aware of the impact of falling house prices on occupancy levels. So it was interesting to read an article in a recent Economist about international houses prices and the extent to which they are over or under-valued based on the long run average relationship of house prices to rents. The most over-valued market in the world is Australia’s, where current house prices are 56.4% above that long-run average relationship. Hong Kong is a close second at 53.7% followed by France (48%), Spain (43.7%), Sweden (39.5%) and then Britain, New Zealand and the Netherlands in the 20s. Canada is well down the list at only 11.4%. The US, after years of recession, is only 3% above its long-run average and poor Japan (pre-earthquake) is 35% below. Owning has been getting cheaper in Japan relative to renting for more than 20 years.

The same issue of the Economist contains a fascinating graph developed by Robert Shiller, of the famous Case-Shiller index that tracks house prices in the US. The graph charts real house prices (ie adjusted for the impact of inflation) in the US over the period from 1890 to 2010. For most of those 120 years, real house prices stayed relatively constant, with the exception of the depression and war years, when they fell well below 100. But the graph charts an astonishing rise in real house prices starting in the late 1990s. Over the next few years real houses prices doubled before falling precipitously in the recession. As the Economist puts it: “The run-up in values was not just unprecedented, it was obviously lunatic.” It’s funny how the human race seems completely unable to avoid market hysteria, whether it’s tulips or houses.

Find the article here:

http://www.economist.com/node/18250431?story_id=18250431

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An Asian Retirement Community

Thursday, March 17th, 2011

Readers of this blog are by now familiar with one of my many obsessions, that being the impact of multi-generational cultures on the demand for supportive seniors housing. The hypothesis is that in cultures where families look after their elders at home until they are so frail they need residential care, the intermediate step of supportive housing (IL, congregate care, service-enriched) is skipped. Here in very multi-cultural British Columbia, there is lots of evidence indicating that this hypothesis is a sound one. For example, in spite of a very large Chinese population (which typically cares for elders at home) there is only one small private pay supportive housing project targeted at the Chinese community.

But a recent issue of the Journal of Active Aging focuses on a retirement community targeted directly at the Asian community in Fremont, California that has been around for a decade. Fremont is a community of just over 200,000 people that is part of the much larger San Francisco Bay area (over 7 million people). The 64 unit project is owned and operated by Aegis Living and is called Aegis Gardens. The article is very positive, highlighting the linguistic skills of the staff (all, at a minimum, speak Cantonese or Mandarin or both), the design of the project (incorporating feng shui principles), and the activities (tai chi, mah-jong, origami). Food is not addressed in the article.

Outcomes have been extremely successful—80% of residents participate in physical activity programs, falls are a fraction of what they are at most communities, average age is older than at most other communities, staff turnover is extremely low.

The president of Aegis is quoted in the article as saying the company needed to negotiate a very steep learning curve on the way to success.

Part of that learning curve is described in an article in the San Jose Mercury News in 2004. That is a very long time ago but it is interesting to note that way back then, residents were upset. Here are some excerpts from the article:

But in the last few months, residents say, beloved Chinese staff members have resigned or been released, and replaced by employees who speak only English. The new staff members have implemented several culturally puzzling changes: buying wine for “happy hour,” moving a pingpong table into the tai chi space, and banning residents from cooking zong zi, a special rice dumpling prepared for the Chinese Dragon Boat Festival.

Residents have also complained that the center only spent $5.25 per resident a day on food. Though management has since raised the food budget to $5.75 a day, the food budget remains an issue. [note: $5.00 per day on food is quite common in 2011]

The Aegis Gardens situation is a “typical business problem” among companies trying to serve ethnic communities, said Felipe Korzenny, Florida State University professor of marketing communities and a local marketing consultant. The Aegis company has no Asian-American managers or corporate executives outside of its Chinese-oriented facility, Lucas said.

Note that was way back in 2004 and clearly, Aegis has addressed those issues. But the fact remains that in a metropolitan area of over 7 million people, where 20% are Asian, there is only one very small retirement community for those 1.5 million people.

Perhaps there are others and if any blog readers know of them please let me know.

Note: in US demographics “Asian-American” typically includes people of East, South East and South Asian descent.

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Top 10 Trends in Seniors Housing for 2011

Wednesday, February 2nd, 2011

Before I get into this, I wanted to let you know that my book The Future of Seniors Housing: Planning, Building and Operating Successful Seniors Housing Projects is now available on Amazon.ca and on eBay. I know it sounds kind of weird to think about listing new books on eBay but apparently it is quite common. Eventually we will have an ebook too and I will let you know when it is available.

In the meantime, Senior Housing News (www.seniorhousingnews.com) has released its Top 10 trends for the coming year. The # 1 trend is price increases in seniors housing due to supply constraints (ie no new supply for several years), demographics, and higher labour and material costs. That seems a bit unlikely to me. Occupancy levels in IL/AL communities in the US are still below 90% and the conventional housing market has not really recovered.

Rents in Canada ARE going up though, at least in a number of communities. Others are having interesting sales events—for example, in Victoria, Holiday is offering free rent for life to one lucky winner per month until March 31st. In Calgary, Holiday is offering $95 rent for the first month and a five year rent freeze. Holiday markets to the IL market more than most operators in Calgary and has very likely been harder hit by the recession as a result.

The # 2 trend identified by Senior Housing News is renovating people’s own homes to make them more age-friendly. They base that conclusion on a report recently released by Harvard’s Joint Center for Housing Studies. The report points to a growing renovation industry In the next five years, partly because of growth in the number of households moving into the 55–64 and 65+ age ranges— when homeowners typically prepare their homes for their retirement years by making aging-in-place retrofits. The Joint Centre expects that market to be particularly strong. That’s interesting because in the past, seniors have spent very little money on adapting their homes to accommodate aging in place. I will come back to this in a later post.

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Integration or segregation of assisted living services in independent living communities

Wednesday, January 26th, 2011

I have posted about this before and there is also a section on the subject in my book The Future of Seniors Housing: Planning, Building and Operating Successful Seniors Housing Projects (now available on our website and soon to be available on Amazon etc).

The thing is, I think I have changed my mind since the book was published (that would be last month). Aha you may think, she is already cleverly planning the second edition. That’s not true although I do think about another book from time to time. What has changed my mind is talking to many people in the industry in recent weeks about the provision of assisted living services in retirement communities. The Lumina Group is working with a new entrant to the industry and it is up to us to advise him about the right strategy—he has no preconceived notions and no established model he is unwilling to deviate from. Should he plan to deliver personal care services to his residents who need them wherever in the building they may live, or should he develop a separate wing for his assisted living customers?

The book comes down on the side of the segregationist model although when you think about it, the term “segregation” has so many negative connotations that its use should immediately raise red flags. But the support for the segregationist model reflects quite specific circumstances in which the assisted living residents are really very frail and receiving significant levels of personal care—hours per day, not minutes per day. In those situations, more independent residents may feel very uncomfortable living cheek by jowl with their much frailer neighbours and as Victor Regnier has pointed out, the feelings may well be mutual. (See my book for further information, or any of Victor Regnier’s of course).

But when daily hours of care are not so extreme, most industry people we have polled strongly support integration. I will go into more detail about why in later posts. In the meantime, I am working on the second edition of The Future of Seniors Housing.

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North American seniors’ housing providers should move to Beijing!

Friday, November 26th, 2010

Last week I made a presentation at the Insight Western Canadian Seniors’ Housing Forum, held at the Four Seasons Hotel in Vancouver. One of the things I talked about was the challenge of widening the market for retirement housing. Usually we consider that a new seniors project can expect to appeal to about 5-10% of the 75+ population in any given market area. Some markets can be higher but most are not.

That’s partly because most seniors aren’t all that keen about the idea of moving to seniors’ housing, which is why we often describe the industry as “need driven” as opposed to “want driven”.  Surveys done by various organizations such as the AARP inevitably find that 95% of survey respondents want to stay right where they are as they age.

Which brings me to Beijing. A recent survey of more than 4,000 people conducted by the City of Beijing found that almost 25% of them planned to move to seniors housing, “a far higher level than the 4% the City had expected”.  Just a little over half the respondents (53.3%) expressed a desire to stay where they were until they died, in very sharp contrast to the 90% the City had expected. On the flip side of the coin, 99% of young respondents to the survey said they would not be able to care for their parents in old age, which could have something to do with the preferences expressed by the elderly themselves.

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55+ Housing in the US still weak

Tuesday, November 23rd, 2010

A recent report from the National Association of Homebuilders clearly indicates that active adult housing in the US is still in recession. The 55+ single-family Housing Market Index (HMI) measures builder sentiment based on current sales, prospective buyer traffic and anticipated six-month sales for the 55+ single-family market.  A number greater than 50 indicates that more builders view conditions as good than poor. In the third quarter of 2010, the index came in at 15, a five-point drop from the third quarter of the previous year. Present sales dropped four points, to 15. Expected sales (six months into the future) dropped six points, to 24. And traffic of prospective buyers fell seven points, to 11.

The condo HMI also dropped from the third quarter of 2009 to the third quarter of 2010.

This is hardly surprising news. With the overall US housing market still very soft, strength in the active adult sector would be anomalous. All those folks planning to move to Sun City first have to sell their houses to someone else.

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