Having showed renewed signs of activity after a long, latent period, the market for nonprofit continuing care retirement communities (CCRCs) is showing a sudden uptick, according to recent Ziegler findings.
As of September 2013, there were eight new CCRCs expected to open by the end of 2015. Today, that number has jumped to 18.
Strong occupancy gains and increased financing activity are presenting a favorable outlook for CCRCs in general. Overall CCRC occupancy reached the 90% mark as of the fourth quarter of 2013, according to data from the National Investment Center for the Senior Housing & Care Industry (NIC) cited by a recent Ziegler report.
This is a slight increase compared to CCRC occupancy during the fourth quarter of 2012, which stood at 89.7% and remained somewhat stagnant throughout 2013, noted Ziegler’s Senior Vice President of Senior Living Research and Development Lisa McCracken, who authored the report.
As CCRC occupancy growth continues to rise, so does development for this type of community, especially considering an uptick of 10 new projects in only a few months, Ziegler points out.
“We are hearing CCRC providers talk about stronger times and for many, a return to pre-recession levels,” Lisa McCracken, senior vice president of Senior Living Research and Development at Ziegler, told SHN in an email.
Greater certainty and liquidity in the capital markets is boosting the confidence of many organizations to embark on new projects or resume halted ones, says Mark Andrews, president of Greystone Communities.
“There are new participants and there are some who had projects delayed during the recession,” he says. “But now that those owners are more certain, they’re beginning to seek financing to start construction.”
Greystone sees 2014 shaping up to be a productive year, with a number of projects in the works. The company has six projects planned for construction this year alone, as well as an expansion project for a non-profit provider in Miami and another startup community in suburban Houston.
“We have renewed confidence that was mitigated during the recession,” Andrews says. “There’s much more certainty now than there was during the economic downturn. The recovery is definitely leading to improved occupancies in CCRCs.”
Another factor adding to increased construction activity, Andrews suggests, relates to a pent-up demand driven by demographic trends.
“Over the last few years, there wasn’t a lot of building, but the population was still aging,” he says. “The demographics have been working in our favor. We’ve seen a very good uptick in new project construction and clients starting to plan projects both on the non-profit and for-profit sides.”
Today’s activity, however, is being led by experienced systems rather than “one-off” projects of the past, says Red Capital Group Healthcare Managing Director James Scribner.
“The difference today versus a few years ago, is today we have experienced and financially solid systems, not one-offs,” Scribner says. “Now we are seeing systems supporting new development with their other projects.”
Further, he sees the development today as being a long time in the making, rather than newly-inspired projects based on a looser financing environment.
“Most of the development we’re seeing are sites identified in the late 2000s where the demographics were always there and projects made sense, but either the capital markets or sponsorship was not in a position to advance it,” he says.
But there is renewed positive momentum based on the improving occupancy levels and stable demographics that have weathered the recessionary time.
Not-for-profit CCRC providers have upheld a historic, eight-year trend of higher occupancy rates than their for-profit counterparts, as noted in the Ziegler report.
As of the fourth quarter of 2013, not-for-profits had an overall occupancy rate of 90.9%, compared to a rate of 87.4% among for-profit providers.
“The most recently released NIC data from the 4th quarter show that the CCRC occupancy levels, particularly among not-for-profit CCRCs, is the highest it has been in some time,” said McCracken. “This data confirmed the CCRC trends we were observing in the final months of 2013.”
Improvements in the overall economy may have also played a role in nonprofit CCRC providers’ activity.
“There’s a renewed optimism among nonprofits,” says Andrews. “Many of them are saying ‘we need to do more’ and now have the confidence and can invest again.”
Written by Jason Oliva and Elizabeth Ecker