Senior Living Nonprofits Remain Bullish Despite Looming Threats

Executives at not-for-profit senior living companies are largely optimistic about the economy and are pursuing expansion plans, positioning for growth as they face increased competition from for-profit peers and other threats.

Compared with last year, 41% of nonprofit executives are more optimistic about the current economic outlook, according to survey findings from Irving, Texas-based Greystone Communities and specialty investment bank Ziegler. Only 5% of respondents—which comprised leaders from 22 organizations operating nonprofit continuing care retirement communities (CCRCs)*—said they are less optimistic about the economy now than a year ago.

In terms of the real estate market specifically, 17 of the 23 responding organizations said they view it as strong, and 3 described it as excellent.

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Given these figures, it is perhaps not surprising that nonprofit CCRCs are scaling back their sales incentives. Only 14% of respondents reported increasing sales incentives this year, compared with 35% in last year’s survey. Meanwhile, 27% said they are scaling back incentives. Only 10% said they were scaling back last year.

Another difference between last year and this year is where the organizations are concerned about occupancy. In the 2015 survey, independent living was cited by 50% of respondents as the an area of concern. This year, that number is down to 39%.

However, the nonprofit leaders are more concerned about assisted living occupancy, with 22% citing AL this year, compared with 15% last year. No one reported memory support occupancy as a concern last year, while 4% singled out this part of the continuum in 2016.

Expansion Continues

For-profit providers loomed as a threat last year, and they have made their presence felt: 78% of the respondents to this year’s survey said that for-profit investments have increased in their markets.

And hotter competition is not the only threat: The regulatory environment and reimbursement changes, and operating costs, both were cited even more often as concerns by CCRC leaders.

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But nonprofits appear to be responding by pursuing growth and change on numerous fronts: 19 of the 23 organizations said they are considering multiple growth initiatives.

Expansion of an existing campus and new service lines are the most commonly cited, with existing campus redevelopment, new campus development in existing markets, acquisitions, and partnering among other options being considered.

Furthermore, many nonprofit CCRCs are poised to embark quickly on these efforts, with 12 of the responding organizations reporting that they are actively planning for new opportunities and their boards are ready. The major constraints remain the same as they were last year, namely, capital market requirements and the availability of a quality site.

Responses to the ZGES Survey of Industry Trends were compiled during the annual Ziegler Greystone Executive Symposium, which took place in early March in New Orleans.

*Editor’s Note: A previous version of this article stated 23 non-profit organizations were represented in the survey; however, one of these respondents was with a for-profit developer entering the space.

Written by Tim Mullaney

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