Hackathon Recap – Giving Boomers What They Want
One of the most talked-about sessions at the recent 2019 NIC Spring Conference was the “Boomer Hackathon,” in which three teams – and those in attendance – brainstormed innovations in seniors housing appropriate for incoming Baby Boomers. A standing-room-only crowd participated in the event, forming small groups to attack the same problem as three teams of experts, who were formed ahead of time.
Popularized by Silicon Valley, the hackathon format hammers out rough, but functional, solutions, usually in 24-72 hours. NIC’s inaugural hackathon did so in 75 minutes, but not without a little advance preparation from each of three official teams. Lead by industry veterans, each team of three was selected from a pool of applicants. NIC’s approach to selection was based primarily on diversity of experience and perspective, as that has been shown to improve effectiveness in studies of hackathons.
The session wasted no time. Hosts Jacquelyn Kung and Bob Kramer quickly introduced the concept at hand, introduced the teams, then ordered them to get to work. Kung then encouraged attendees to form small groups of their own to dig into the issue, which was to create a retirement living model that works for Boomers, a business model that works for the investor (both debt and equity), and a business model that works for the operator.
The teams were:
Lynn Katzmann, CEO, Juniper Communities, with Gracyn Robinson and Mike Mattingly
Kurt Read, Principal, RSF Partners, with Rachel Smith and Hsuan-Yao Huang
Sean Kelly, CEO, the Kendal Corporation, with Ashley Wilkens and Astrid Kramarz
A panel of three independent judges, all boomers themselves, was on hand to ask questions and provide feedback. These were Steve Moran, Publisher, Senior Housing Forum, Jenny Brimhall, a San Diego realtor, and Todd Reis, an actor and magician.
While the teams got to work, Kung split attendees into half, instructing those on one side of the room to form small groups to brainstorm one innovative feature of a living complex attractive to Boomers age 64-73. Groups on the other side of the room were asked to think of an innovative financing approach for a non-traditional living model – and to specify if it was for the operations side or real estate side.
The room buzzed with discussion, as attendees and teams alike attacked the issues, huddled around whiteboards, or circulated the room to listen in. After ten or so minutes, it was time to hear each team’s 2-minute “pitch” to the judges.
First to pitch was Kurt Read, whose team presented the “live to learn” concept, a Cornell University alumni community on New York’s Roosevelt Island. The community would mix senior alumni with college students, offer continuing education, in luxury all-inclusive living spaces within easy reach of the city. The project’s investment case for operators features marketing to a large alumni community and outsourcing a-la-carte services. Net margins of 40% might be shared with the university. Assumptions were for 200 apartments; 60% double occupancy; 100 day passes at $5,000 per person and a 90% steady state of occupancy.
Judges and the audience asked questions of Read, who highlighted the attractiveness of “going back to school” and that the model could scale to other locations, making it a “portable” IL concept.
Katzmann’s pitch was for an international destination offering, featuring efficient 3-D printed buildings and interiors, solar and energy-efficiency, and even gardens to supplement food supplies. Seniors would be pitched on the ability to travel and live in communities around the world. Financials for operators would net an EBITDA of 40%, with retail covering 15% of debt service requirements. Investors would save 20-25% on lower-cost 3-D printing and gain significant savings from solar and energy efficiencies. A seven-year horizon and 12–month lease up would yield a 5% cap rate upon sale, for a 6% unlevered IRR.
Questions yielded enthusiastic answers from the quick-thinking Katzmann, who addressed numerous potential flaws with as many potential upsides and creative solutions.
The final pitch was delivered by Sean Kelly, who revealed that his team’s pitch was, in fact, a real project, currently in development. He walked through artist’s renderings and floorplans as he described how “Kendal at Sonoma”, marketed as a “Zen-lifestyle community,” will offer Boomers portability with sister campuses in other locations, access to community, walkability, and numerous amenities designed around life-balance and well-being.
As session co-facilitator Bob Kramer later pointed out, no matter who might be considered a winner, perhaps the most interesting outcome of NIC’s first Hackathon was the revelation that all three teams made portability a feature of their appeal to Boomers. Other attendees noted that, while perhaps not yet the new normal, the new concepts – and the idea that operators and investors should think outside the box when preparing for Boomers – should be taken seriously as the generation that changes everything approaches senior living and care.
Editor’s note: All calculations presented in this article are rough estimates and do not represent actual underwriting models.