News & Press Releases

Operating Fundamentals Remain Steady for Independent Living and Assisted Living During the First Quarter of 2008

Press Room – 2008 NIC Press Releases

Operating Fundamentals Remain Steady for Independent Living and Assisted Living During the First Quarter of 2008

Contact: Renee Tilton, (410) 626-0805 or

Annapolis, Md. – Key data from both the national and top metropolitan market levels showed that operating fundamentals for the independent living and assisted living sectors remained relatively stable during the first quarter of 2008, according to the National Investment Center for the Seniors Housing & Care Industry (NIC).

“We’re really not seeing a significant amount of stress on the industry as of yet from the spillover of the residential housing market and economic slowdown,” said Michael Hargrave, vice president – NIC MAP™. The NIC MAP data and analysis service tracks key financial and operating benchmarks in the nation’s top metropolitan markets. During the first quarter of 2008, this database revealed that the average occupancy rate for independent living stood at 92.1 percent, which was down roughly 170 basis points year over year. “Although that sounds like a large drop,” explained Hargrave, “it was up from 89.9 percent just three years ago – or 220 basis points.”

In fact, 27 out of the 31 markets that NIC MAP tracks for occupancy saw a decline from a year ago. “But what is interesting to note is that more than half of these markets saw positive demand or absorption during this same period,” continued Hargrave. “That means that prospective residents are becoming more comfortable with the concept of seniors housing and making the decision to move into these communities.”

On the assisted living side, the average occupancy rate was down roughly 120 basis points to 90.3 percent in the first quarter. But similar to the independent living sector, absorption, or demand, grew. Also, revenue per occupied unit (REVPOR) continued to grow on a year-over-year basis, which was another positive for the sector.

Thilo Best, chairman and CEO of Horizon Bay Senior Communities, agrees that the industry is holding up in the current market. “As we look at our portfolio of 12,000 units during the first and second quarters of 2008,” he told industry leaders on a recent NIC Executive Circle Call, “our move-in rate was actually up, but our move-out rate was up proportionally. So our blended occupancy rate for independent living stood at 94.3 percent at the end of 2007 and is 93.3 percent today. For assisted living, our occupancy level has stayed relatively level at 95 percent. So it’s a little hard to characterize the market as anything other than pretty resilient, given some of the macroeconomic factors that everybody’s facing.”

Noah Levy, managing director, PREI® (Prudential Real Estate Investors), is experiencing a similar situation. “Looking year-over-year, we are seeing some pressure on occupancies and fill-up rates,” he said during the same Executive Circle Call. “However, we are still getting very good rent increases across our portfolio. And so, the amount of revenue growth and the control of expenses are allowing for growth in net operating income (NOI) and revenue per occupied unit. When you continue to have good NOI and REVPOR growth, you’re well-positioned to really grow NOI moving forward when pressure does ease on occupancy. And I think that speaks to the stability of the asset class.”

NIC’s other quarterly data service, the NIC Key Financial Indicators™ (KFIs) that track information on a national level, showed a similar trend in the basic fundamentals, remaining fairly solid throughout the first quarter. For example, the percentage of non-performing loans in the seniors housing and care industry remained quite low compared to historical standards. In the first quarter of 2008, it was 0.3 percent, which compares favorably to other commercial real estate asset classes.

“Perhaps the most telling data point from the KFIs was the amount of financing placed in the first quarter, which was roughly $926 million dollars,” said Hargrave. “Even though this loan volume is a measure of same-store activity from eight key lenders and is by no means a measure of industry-wide activity, it’s important to note its direction. Compared to the same quarter last year, that amount placed was down nearly 60 percent…. a significant decline in all types of financing placed in the industry.”

“We will probably see a slowdown in construction activity going forward,” said Angela Mago, senior vice president and national manager, Key Bank Real Estate Capital. “Capital is precious and more expensive for most lenders today. We need to make sure that we are allocating our capital wisely. Relationships are key. We continue to make capital available to organizations where we already have established relationships, although we are certainly open to new, meaningful ones. I think that’s probably a very consistent message with what most operators are hearing across the industry.”

About NIC

Founded in 1991, the National Investment Center for the Seniors Housing & Care Industry is a nonprofit education and research organization providing information about business strategy and capital formation for the senior living industry. NIC is the leading provider of historical and trend data on the industry through its Key Financial Indicators™ (KFIs) that report nationwide statistics and its Market Area Profiles (MAP™) Data and Analysis Service that tracks properties in the 100 largest metropolitan areas. Proceeds from its annual conference are used to fund research on issues of importance to seniors housing and care decision-makers. For more information, visit or call (410) 267-0504.

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