Senior Care Realty
Senior Care Realty News
November 2009
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Investment Benefits of Senior Housing - Second in a Series
By Jon Meier, Director of Advisory Services
jon@seniorcarerealty.com

In our last article, we touched on the topics we will be discussing in this series on investing in the senior housing industry. In this article, we will focus on the investment benefits of senior housing. 
 
Real estate has taken a hit over the past few years. While the residential market has received the most attention, commercial real estate of all kinds, including senior housing, has been affected as well.  So why would someone consider an investment in senior housing?
 
Senior housing has had its share of up's and down's, but it is becoming a more stable form of real estate investment. Assisted living in particular is a need-driven product and many more consumers are moving to assisted living because of the growing number of the elderly needing assistance with daily activities. 
 
One of the benefits of recent market declines is that some senior housing investments are more affordable today than they were a few years ago. Capitalization rates have increased since 2007, which means that values have decreased. This isn't good news for those who made investments a few years ago, but it provides an excellent entry point for new investors.
 
The residential market decline has had an effect on new admissions to some degree. Some consumers entering senior housing don't need immediate placement but can select when they move. If they are waiting for their house to sell, the wait could be long. While this has caused some decline in industry occupancy rates, the decline has showed signs of stabilizing.
 
While many point to "baby-boomers" as the source of boom in the senior housing industry, such enthusiasm may be premature. Baby-boomers are having an impact in the 55+ independent living and active adult communities. With the average age of residents in assisted living around 85, it will still be some time before baby-boomers have a significant impact on occupancy in assisted living. Nevertheless, the 85+ age cohort is among the fastest growing segments of the population in percentage terms and more consumers enter assisted living everyday. The future growth in demand for all segments of senior housing is undeniable, and exciting.
 
The recent constrains from the credit markets has had negative effects on real estate. But a silver lining may be in the reduced pace of new product development. The inability of many developers to obtain the financing needed to bring new facilities to the market has strengthened the performance of existing facilities. 
Real estate investment has many benefits. But there are several benefits that are unique to senior housing:
 
·         A stable real estate product that is needed by many consumers
·         Demographic shifts that will help enhance long-term value
·         Supply constraints in the short-term should boost yields
 
The senior housing industry can provide benefits for investors seeking a stable cash flow and higher rates of return. Of course there can be risks involved in this industry, which we will discuss next month.
 
To learn more about investing in senior housing, contact Senior Care Realty at 877-834-4175 or visit www.seniorcarerealty.com.
 
New Listings. New Opportunities.
Madison, WI:  Net Lease Investment - 9% CAP. $325,000
 
Western WI:  27-unit assisted living portfolio with 31 licensed beds. Excellent cash flow, high occupancy and 17.6 CAP. $2,900,000
 
South Central WI:  16 unit Community Based Residential Facility licensed for 20 with Class CNA license. The facility is 100% occupied with a waiting list. $950,000
 
Oregon, WI:  3.7 acre downtown site that has been approved for 100-units of Senior Housing.
 
Lodi, WI:  2.0 acre site located across from the brand new Lodi High School and adjacent to the Prairie Health Center Clinic currently under development.
 
For more information on these listings, contact Daren Dudgeon at 877-834-4175 or daren@seniorcarerealty.com.


Tucson, AZ:  9-bed assisted living home currently with 8 residents. The 2,265 SF home features several upgrades and is conveniently located.  $355,000 - For more information, contact Kerri Ciesielski at 877-834-4175 or kerri@seniorcarerealty.com.
 
Profiles in Business
Profiles in Business is a regular newsletter column. We'll feature profiles on Senior Care Realty's business partners, clients, lenders, and others in and around the senior care industry.
 
Addressing Your Risk Potential in Assisted Living

A number of attributes make for a successful assisted living operation. Compassionate caregivers are one ingredient; a homelike setting and attractive physical plant are also required; good food and social activities round out some of the most visible traits of successful businesses. But what can spell doom for some operators is a failure to manage, control and mitigate risk. In such a scenario, risk can become a sizeable financial loss.
 
Losses in assisted living stem often from three issues, says Christine Kenyon, senior account executive and partner at M3 Insurance Solutions for Business. "Most often, losses come from safe patient handling issues, failing to deal with combative residents, and slips, trips, and falls," she says. Kenyon advises owners and operators to develop a risk management program that takes into account your organizational culture, type of residents and the regulatory climate. "Quality care and risk management go hand-in-hand. It is important to have someone who can help you build a risk management program with an understanding of the regulations you face," she explains.
 
Frequently, a loss can be prevented by identifying factors that increase the likelihood of a loss, then eliminating the factor or minimizing its effect. "You have elderly residents in the building, and often, elderly visitors. There must be good lighting outside. If there are cracks in the sidewalk, they must be fixed. Inside, slip-resistant flooring helps prevent falls," she explains. Furthermore, Kenyon says that as residents age and the complexities of their care increases, senior care providers must be prepared to manage increased risk in their communities.
 
Overall, Kenyon says there are four ways for assisted living owners to manage risk.
1)      Ignore it and fail to address it.
2)      Devise a risk management program to minimize risk and try to control risk through loss control efforts such as a safe patient handling program, an effective workplace violence program that reduces issues with combative residents, and a comprehensive housekeeping program to help reduce falls.
3)      Improve management of contracts and transfer risk through contracts. "This is often where those in the assisted living industry miss it; they are not transferring risks that could be transferred," Kenyon explains.
4)      Minimize risk through self insurance.
 
For more information, or help with strategies 2 through 4 above, contact Kenyon at chris.kenyon@m3ins.com. M3 Insurance Solutions for Business serves more than 5,000 commercial clients, and has particular expertise in the areas of insurance placement and risk management in the senior care market.
 
Upcoming Industry Events
· January 27, 2010, How to Buy and Sell Assisted Living Facilities
Senior Care Realty is hosting a second informational workshop in Arizona. Location is the Scottsdale Plaza Resort in Scottsdale. Download the registration form. 
 
· March 24-25, 2010, WALA's 15th Annual Spring Conference
Make your plans to join us at the Kalahari Water Park and Resort in Wisconsin Dells. More information will be available soon. Visit www.ewala.org for updates.
 
Senior Care In The News
News and Details on senior care sales and developments
 
 
 
 
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