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Are Entrance Fee CRCCs Underperforming?
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Recent news coverage suggests that some percentage of seniors can no longer afford (or will choose not
to pay) the large up front entrance fees that many continuing care retirement communities (CCRCs) charge
and have thus stopped moving in. Chapter 11 bankruptcies by Covenant at South Hills (Mt. Lebanon, PA),
Shelburne Commons (Nantucket, MA), and Erickson Retirement Communities (corporate) have further heightened
concern about EF CCRC performance. In addition, Senator Herb Kohl (chairman of the Senate Aging Committee)
has asked the Government Accounting Office (GAO) to study CCRC financing and to focus on, among other
items, identifying best practices for minimizing the financial risk CCRCs may pose for residents (including
best practices for ensuring the financial viability of CCRCs). Even within our own industry, there are
perceptions that entrance fee (EF) CCRCs are underperforming other forms of seniors housing. An examination
of the data is prudent to determine if this perception is based on fact, or the problems of a small
minority of properties.
NIC MAP has previously documented that EF CCRCs boast the highest overall occupancy rates among the
seniors housing property types. This continues to be the case during this downturn. In 3Q09, EF CCRCS
had an average stabilized occupancy in MAP31 of 90.8%. This compares to 88.4% for majority IL rental
properties and 89.0% for majority AL rental properties. Furthermore, the decline in the occupancy rate
of entrance fee CCRCs has actually been slightly less than that for rental independent living properties.
From recent peak to trough, EF CCRCs in MAP31 saw their occupancy decline by 430 bps, while majority
IL rental properties declined by 480 bps.
CCRCs have also maintained positive cumulative absorption during this downturn. Since 1Q07, cumulative
absorption for CCRCs is positive by 5,418 units. Supply outpaced absorption during that time, increasing
by 14,331 units, which caused occupancy rates to fall (Please note we are using supply and demand for
all CCRCs as a proxy for entrance fee CCRCs).
So from a fundamentals standpoint, EF CCRCs are performing in line with other forms of seniors housing
during this downturn. But by examining the data further, we do see a small subset of EF CCRCs that have
been underperforming during the recession.
Construction to inventory levels for EF CCRCs reached 6.2% in 3Q07, compared to 3.7% for majority IL
rental properties. It is safe to say that, on a relative basis, EF CCRCs were building more than other
types of seniors housing leading up to the downturn in housing and the recession. As this recession
has manifested, seniors housing properties less than two years of age (which include EF CCRCs) appear
to be underperforming compared to the same category just two years ago. Seniors housing properties less
than two years old were 54.6% occupied in 3Q09, which is down 18 percentage points from 3Q07 (when it
was 72.6%). There is obviously some stress in select properties that have opened since early/mid 2007
(including EF CCRCs). However, the EF CCRC inventory less than two years old represents only 2.4% of
the EF stock, and has not caused larger downward movements in overall EF CCRC metrics.
Thus, the data does not support the perception that EF CCRCs as a whole are underperforming other forms
of seniors housing. It does reveal, however, that EF CCRCs, along with other seniors housing properties
that opened in the last two years, have suffered disproportionally during the recession in terms of
occupancy loss.
Source: NIC MAP® Data & Analysis Service
Source: NIC MAP® Data & Analysis Service
Source: NIC MAP® Data & Analysis Service
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NIC Research Insights
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Seniors Housing Occupancy Rebounds as Demand Ticks Up in 3Q09
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Source: NIC MAP® Data & Analysis Service
Occupancy rates in seniors housing properties rose for the first time in over two years in 3Q09 according
to data released by NIC MAP®. The rebounding of occupancy rates coincided with improvements in the overall
economy, likely aided particularly by recent improvements in the residential housing market. The residential
housing market likely bottomed in May 2009 and has since risen 5.3% according to the S&P/Case-Shiller
Composite-20 Index. The monthly gains have moderated since July and even retracted slightly in October,
indicating recovery is likely not to be linear. The increase in demand seen in seniors housing in the
third quarter was likely heavily influenced by these noted improvements in the residential housing market,
particularly independent living.
In addition to the residential housing market, employment also likely heavily influences demand for
seniors housing, perhaps more so in assisted living due to the relationship with adult children. While
the economy has not realized employment growth yet, the pace of employment deterioration has significantly
declined from the average monthly decline of 560,000 in the first half of this year to a monthly decline
of 11,000 in November according to the U.S. Bureau of Labor Statistics. Also encouraging is the improving
initial jobless claims data released by the U.S. Department of Labor. Data released January 7th, 2010
shows initial jobless claims at 434,000 for the week ending January 2nd, an increase of 1,000 over the
previous month, but the four week moving average continues to decline and improved 10,250 claims from
last week to 450,250 from 460,500. The weekly initial claims data could foreshadow employment growth,
as many economists are expecting to see net employment growth when initial jobless claims falls to 425,000.
For current market-by-market information on seniors housing performance, please visit www.nicmap.org
Sources Referenced:
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MAP Portfolios Currently in Beta Testing
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NIC MAP recently released a beta version of its newest product which will become available later this
year. MAP Portfolios is the industry’s first data tool, which will allow owners and operators to benchmark
their individual properties against groups of competitors on occupancy and rent. Competitive groups
can be automatically assigned or hand selected to allow for customization.
Competitive groups can be automatically generated based on several customized filters including property
type, campus type and profit status or geography parameters. Once competitive groups are selected, a
Portfolio Performance Report is developed which will benchmark your individual properties performance
against the competition.
Portfolio Performance Reports will be priced annually on a per-property basis and will only be available
to owners and operators who contribute their data to NIC MAP.
CLICK HERE to view a sample. For more information, please
contact Amber Jacobs at (410) 267-0504.
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4Q09 Data to be Released February 16
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On February, 16 NIC MAP will release its 4Q09 data and analysis to subscribers and hold its quarterly
subscriber webcast to discuss insights from the data about industry performance.
NIC MAP tracks performance on several seniors housing indicators including occupancy, rent growth, supply
and construction data for seniors housing and nursing care properties in the 100 largest metros. See
how your market is performing and gain insights into seniors housing performance data with NIC MAP Metro
Market Reports and Inventory & Construction Reports.
For as little as $299, you can purchase NIC MAP Metro Market Reports for any of the 100 largest Metro
Markets. Join the industry's leading developers, investors, lenders, operators and service providers
who leverage the NIC MAP database to help guide their investment decision-making.
CLICK HERE
to purchase your Metro Market Reports and Inventory & Construction Reports today or contact
Amber Jacobs
at (410) 267-0504 for more information.
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NIC Events Update:
Last Week to Save - Earlybird Deadline January 15th
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National Skilled Nursing Investment Forum
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The National Skilled Nursing Investment Forum
March 8-10, 2010 • Hilton San Diego Bayfront Hotel
Moving from Yesterday to Tomorrow: Capital and Reimbursement Strategies
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NIC's new event, the National Skilled Nursing Investment Forum, will bring together key representatives
from the skilled nursing sector, including owners, operators, debt and equity capital providers, and
association leaders from across the country. In addition to exceptional networking opportunities, the
Forum will offer numerous educational sessions that focus on the Forum's theme "Moving from Yesterday
to Tomorrow: Capital & Reimbursement Strategies"-- utilizing case studies to illustrate successful renovations,
new developments and transformations, as well as explain strategies for revitalizing skilled nursing
properties, improving quality and increasing revenue.
The Operator Rate increases by $150 and the General Rate (for non-operators) increases by $350 after
Friday, January 15, 2010.
CLICK HERE
to download a PDF of the Preliminary Program.
CLICK HERE
for more information and to register.
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Regional Symposium
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2010 NIC Regional Symposium
March 9-11, 2010 • Hilton San Diego Bayfront Hotel
Leadership for a Demanding Journey: Adapting to Changing Expectations
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At this year's NIC Regional Symposium, experts will address pressing issues involving access to capital
and what impact the economy is having on your customer base. Programming is created specifically for
providers and financiers with local or regional portfolios in the seniors housing and care sector and
will provide information and strategies to help attendees adapt to today's demanding market and turn
obstacles into opportunities. Don't miss your chance to attend this educational and networking event
that will bring together key representatives from the private-pay seniors housing sector, including
regional owners, operators, and developers as well as regional and national debt and equity capital
providers.
The Operator Rate increases by $150 and the General Rate (for non-operators) increases by $350 after
Friday, January 15, 2010.
CLICK HERE
to download a PDF of the Preliminary Program.
CLICK HERE
for more information and to register.
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Residential Housing and Commercial Real Estate Forecasts for 2010
and the Implications for Seniors Housing
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Webcast Replay with More Than 70 Data Slides Now Available
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"John Burns' presentation was the most comprehensive I have listened to and viewed regarding housing
and commercial real estate market conditions. It was by far the best!"
"Joining up again for Executive Circle membership, yesterday, was the best $495 investment I have ever
made on behalf of [my company] for information I can use in growing my lending practice and understanding
risk exposure in our existing portfolio!"
"The webcasts you host are timely, relevant, and very valuable. We always walk away from them with new
things to consider and new perspectives we challenge ourselves with from every call."
"Burns' data was terrific and Thilo and Dan are among the best...well done!"
–These were some of the comments by participants in the recent 4Q09 NIC Executive Circle webcast.
John Burns, president of John Burns Real Estate Consulting, gave a penetrating analysis and forecast
of the residential housing market, including his assessment at the regional and individual metro market
levels. Burns also discussed current conditions in commercial real estate and what they will mean for
commercial real estate lending. Industry veterans Thilo Best of Horizon Bay Retirement Living and Dan
Madsen of One Eighty and Leisure Care gave their views on 2010, as well as shared what they are seeing
in their own portfolios.
Wish you had listened in and had access to the more than 70 slides with detailed data on residential
housing, commercial real estate and seniors housing performance?
It's not too late!
CLICK HERE
to purchase this outstanding webcast replay.
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Seniors Housing & Care
Industry Calendar
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| January 2010: |
| 19-22 | NAHB International Builders Show, Las Vegas, NV |
| February 2010: |
| 9-10 | AHCA/NCAL Quality Symposium - Baltimore, MD |
| 17-19 | AHLA Long Term Care and the Law Conference - Miami, FL |
| 22-24 | AAHSA Future of Aging Services Conference and Leadership Summit - Washington, DC |
| March 2010: |
| 8 | NIC Conference Planning Committee Meeting, San Diego, CA |
| 8-10 | NIC National Skilled Nursing Investment Forum, Hilton, San Diego, CA |
| 9 | NIC Executive Committee Meeting, San Diego, CA |
| 9-11 | NIC Regional Symposium, Hilton, San Diego, CA |
| 11-12 | AHCA/NCAL Independent Owner Conference - Scottsdale, AZ |
| 24-25 | PREA Spring Conference, The InterContinental Boston, Boston, MA |
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If you are interested in
advertising in the
NIC Insider Newsletter,
please contact
Gary Infante at
webmaster@nic.org.
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