As recent data suggests overbuilding in certain markets, the stakes are higher than ever for senior housing providers to implement a more disciplined and forward-thinking approach to development.
In fact, the decisions industry members make today will ultimately determine whether they thrive or fall by the wayside, senior housing executives agreed during Senior Housing News’ 2015 Summit in Chicago on Thursday. Being successful in new development is not just about being the best operator, but requires taking a magnifying glass to the local market and prospective partners, and investing in tomorrow’s resident.
‘Life or death’ decisions
“It all starts with the right market,” said Mark Rockwell, principal of Anthem Memory Care, adding that one pocket of a market may have an unmet need while just a few miles away sits an oversupply of product. “You will live or die by your market selection. You can’t operate yourself out of a bad market.”
The Lake Oswego, Ore.-based company has locations throughout Colorado and California and recently expanded into Illinois.
It’s more foolish than ever for operators to assume they will win a large share of the market just by being a better operator than the competition, he said.
“While great care and operations are certainly an advantage, it will not get you a full building if there are no residents who want to move in,” he said.
Anthem practices a three-tiered approach to market research that includes performing in-house research, outsourcing research and then outsourcing research to a final third-party.
The local labor pool is one of the many aspects considered in this research, Rockwell explained.
“We have passed on a couple opportunities where we thought there was an unmet need but [we saw] that within that geographic area it was difficult to find qualified help,” he said.
The right partner
As new entrants hailing from the multi-family and hospitality industries continue to seek opportunities in the senior housing space, it’s more important than ever to choose partners who understand the industry, said Kathryn A. Sweeney, co-founder and managing partner of Boston, Mass.-based Blue Moon Capital Partners LLC, a capital provider.
New entrants are also adding a level of risk to the sector: their growing pains could result in residents being endangered, or worse, and the consequences could mean more regulations across the entire industry.
“The right partner should be knowledgeable and preferably cycle tested,” Sweeney said. “Not every deal will go according to the pro forma—hopefully it does better. But if not, you want the right partner to stand by you through the ups and downs.”
Having knowledgeable management participate in the facility design is critical as well, Rockwell said.
“Senior housing is not a real estate business,” Rockwell said. “It is providing care and attention to seniors, especially as you go up [in acuity]. “Individuals who come in and are not focusing on the operational aspects of the community will likely have serious problems.”
Indeed, real estate is just one component of being in the business of senior housing, said Matthew Phillips, executive vice president of Chicago, Ill.-based Senior Lifestyle Corp. The company has about 165 communities nationwide.
“Think of our industry as a three-legged stool,” Phillips said. “One leg is real estate; another is hospitality, including food service, housekeeping [and other amenities]; and the third is health care. It’s how well someone integrates those three functions that will determine success.”
The customer of today and tomorrow is more discerning that the customer seen in years past.
“You want [your community] to have the design elements the more discerning customer is going to want,” Sweeney said, noting that what residents and their families expect differs from market to market.
Providers should take notice that today’s decision maker is often the adult child, who will likely expect technology-driven communication to keep them abreast of their parents’ well-being on a day-to-day basis in higher acuity settings, Phillips said.
“Ten years ago the decision maker was the customer who was going to be a resident,” Phillips said. “That’s a different scenario than today. Providers who can better communicate with the children of the customer will probably win more market share.”
On the technology front, providers should ensure they have enough bandwidth to service both the resident- and staff usage of Internet, especially as more cloud-based services are being utilized, Sweeney said.
Even as they serve new customers, successful operators also will have to be serving another group more and more: health care partners, such as integrated provider networks.
“We’re seeing the integration or pending integration of private pay senior housing communities with the health care system,” Sweeney said, adding that electronic medical or health records are being set up in a way that best aligns with what hospitals are doing. “Partnering with the healthcare continuum is what we should be focusing on.”
Written by Cassandra Dowell