After Downturn, Non-Profits Start to Look Again at New CCRC Construction

A slowdown in continuing care retirement community (CCRC) construction may be reaching its end as occupancy rates improve and non-profits see increased competition from for-profit organizations building standalone memory care and assisted living communities.

Data from the National Investment Center for Seniors Housing shows for-profit companies are doing the majority of new construction during the year 2013, but that might be ready to change.

Coming off strong third-quarter performance, non-profits are starting to do strategic planning for the first time since the financial crisis, according to Dan Hermann, head of investment banking at Ziegler.

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“Our system clients are feeling financially sound and will need to respond to the increased competition from stand alone memory care and assisted living,” he says.

During the annual Ziegler Strategy Conference in San Antonio, which attracted more than 500 attendees last week, a session focusing on new construction drew so much attention, it left standing room only.

While for-profits competed in the CCRC space prior to the financial crisis, the downturn has led almost all of them to depart from the entrance-fee market entirely. Historically, the market for CCRCs has been dominated by non-profits, which operate an estimated 90% of the entrance fee communities and 80% of all CCRCs in the United States, according to LeadingAge.

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Hermann admits that for-profits have an advantage in their ability to develop freestanding memory care and assisted living oriented properties relatively quickly. CCRC development has higher barriers to entry than standalone communities, which creates a challenge for non-profits.

More widespread development of CCRCs will come back, according to Hermann, but it will come after occupancy levels improve and there is some more sustained market stability.

“Organizations typically want a year or two of stabilization,” he says. “They’re also careful about growing in a proactive and disciplined way. It’s always a balancing act.”

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Written by John Yedinak

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