ATLANTA — Seniors housing by design has both elements of hospitality and healthcare. But which is more important to developers trying to build the next wave of senior facilities?
Each developer has a different opinion, based on a development panel at the third-annual InterFace Seniors Housing Southeast conference, held Aug. 25 at the Westin Buckhead in Atlanta. The all-day event drew approximately 315 industry professionals.
Zach Bowyer, managing director of CBRE, moderated the panel entitled “The Outlook for Seniors Housing Development: What’s Being Built, Where, and are Supply and Demand in Balance?”
Jeff Arnold, chief operating officer of The United Group of Cos., mostly develops independent living assets in New York, Florida and Georgia. Arnold’s main concern is with the hospitality side of the business, as his projects tend to be lower acuity than some of his counterparts on the stage.
“From a design standpoint, we’re trying to drive our age down as much as we can. Right now we trend at about 78 years old. If we could push that under 75, that will give us longevity,” said Arnold. “We try to design more active communities, focusing on things that are more modern.”
The independent living sector has legs for future development as Baby Boomers haven’t quite aged into the space, according to Arnold. Amenities are of the utmost importance to his projects, similar to how student housing offers the latest and greatest to their renting cohort.
“Independent living is going to be the new student housing sector in our business,” said Arnold. “That space is coming into its own.”
Charlie Jennings, chief development officer of Harbor Retirement Associates, builds mostly assisted living and memory care facilities, but says nowadays these assets look indistinguishable from the lower acuity products in the market.
“The lines are getting blurred. The assisted living product being developed now looks very similar to what we developed as independent living 10 years ago,” said Jennings. Harbor Retirement operates 23 communities in the Southeast and Midwest, with 14 projects under development across the country.
Although the design of assisted living and memory care is similar to older stock of independent living, Jennings feels that medical care is still paramount in his space.
“A segment of assisted living population is gravitating toward a more medical model. They’re developing more strategic alliances with healthcare systems and focusing more on the care side,” said Jennings.
Practically, Jennings concedes that they’re marketing their assets to the adult children, who need to see the senior residents happy and engaged before choosing a destination for their senior parents. Therefore, healthcare sometimes has to take a back seat to hospitality, at least initially.
“What do the adult children see when they walk in: seniors active and engaged or vegged out in a corner watching TV? You’ve got one chance to dispel all the myths they hear about assisted living, and if you do it well they’ll choose you,” said Jennings. “Ultimately you need to do both hospitality and care to be successful.”
Jeramy Ragsdale, principal of Thrive Senior Living, is also an assisted living and memory care developer and agrees with Jennings that both hospitality and healthcare elements are needed in an effective property.
“Hospitality attracts the adult son or daughter, but eventually the healthcare is what will keep the seniors there long-term,” said Ragsdale.
The development panel also included two developers focused on continuing care retirement communities (CCRCs), which offer the full continuum of seniors housing care — independent living, assisted living, memory care and skilled nursing.
Scott Gensler, vice president of business development at Erickson Living, said that the company hides away the medical components, but that the residents know that it’s there if needed. Erickson Living owns 19 CCRCs that house roughly 25,000 residents. The developer currently has 1,000 units under construction. The most important element of success, Gensler said, is making sure the residents feel comfortable as the average length of stay for CCRCs is higher than other sectors.
“Our typical occupant lives in our properties for 10 years, which is different than assisted living, memory acre or even independent living assets,” said Gensler. “We want residents feeling comfortable living in our communities for a long period of time.”
One of the things that Erickson Living focuses on is developing units for senior couples, because some married residents don’t feel that senior assets truly cater to spouses who wish to live together in a CCRC.
“There’s a large quantity of seniors who are still married,” said Gensler. “We’re focused on making sure that two people can live in the unit. At some of our communities we have 60 percent couples, so that helps with the length of stay.”
The other CCRC developer on the panel, Richard Ackerman, chairman and senior managing principal of Big Rock Partners, said his company’s projects are ultimately more hospitality focused.
“I like to say that I build senior apartments with some healthcare,” said Ackerman. Big Rock currently has 600 units under construction in Florida and South Carolina, with three more projects planned for 2017.
The third-annual InterFace Seniors Southeast conference was held on Thursday, Aug. 25 at the Westin Buckhead in Atlanta. The event drew approximately 315 attendees.
What Keeps You Up At Night?
Bowyer ended the development panel asking each participant to say what keeps them up at night the most as it relates to the seniors housing industry. Below are their edited responses:
Arnold — “I’m an operator so for me it’s operations. Once we get the right design and we feel we’re moving in the right direction, you have to fill the building. Human capital is difficult to come by.”
Gensler — “I’m worried we’re going to be completely under-supplied if we look at the long-term view. I’m concerned we’ve said ‘no’ to markets that we should have said ‘yes,’ because we get over-cautious about over-building for today’s market.”
Ragsdale — “For me today it’s human capital, finding the team to fill the building. We’re now beginning to recruit from outside the industry and focus more on training sharp people in the skills they need for our industry. The underlying fear there is filling the building and having a great culture and great performance, but the action item is finding folks to carry that out.”
Jennings — “Good executive leaders are hard to find. The good ones are really sought after, and the best ones we have get a call a week from other companies trying to pull them away. On the development side, it’s fears with lease-up. Did I gauge the market right? There’s a lot of pain that can be overcome with a successful lease-up. But when you stumble out of the gate, that’s when things can get hairy.”
Ackerman — “What I’m worried about is that we missed something during the development. What happens inevitably during construction is that architects have different needs month to month and it goes for 18 months. I really don’t know what the building is going to cost until the building is finished. That’s reality. I’m responsible for the cost overruns, so I stay up at night thinking about what I’ve missed. There are a thousand things that go into a senior property — tables, chairs, pool equipment, etc. — and it’s way more complicated than it seems. The way to tell if a developer has run out of money is if there’s no art on the walls.”
For more information about this conference and other events hosted by InterFace Conference Group, click here.
— John Nelson