Continuing care retirement communities (CCRCs) have been around for a long time, with their roots in religious organizations, but the for-profit operating model of today presents specific challenges and opportunities.
Current CCRC leaders might sometimes feel like they’re in the “space shuttle business” or fighting a perception that they’re operating a “dinosaur product.” To learn why, check out this roundup of quotable moments from a wide-ranging conversation with three top executives leading the CCRC charge, which took place at the recent Argentum Senior Living Executive Conference in Nashville.
Brookdale Senior Living
As the largest senior living provider in the country, Brentwood, Tennessee-based Brookdale Senior Living (NYSE: BKD) offers the full continuum of living options, including CCRCs. Currently the company has 32 rental CCRCs throughout the country as well as 16 rental CCRCs as part of a joint venture with real estate investment trust (REIT) HCP Inc. (NYSE: HCP).
Chris Bird, president of entry fee and owner relations at Brookdale, spoke about the financial side of owning, developing and managing CCRCs.
“Capital is the biggest challenge. When you’re in the business of developing and owning CCRCs you’re in the space shuttle business essentially. You’re building big rockets that take a long time and consume a great deal of fuel,” Bird said. “You have to have equity to get it off the ground, you need access to human capital and you have to have a long-term perspective for the business.”
“We are relying on folks coming form outside of the community to boost occupancy, but we’re seeing residents in independent living bring in private-duty home health care just to stay in independent living a little longer, which can be a drag when we we’re trying to turn independent living residences,” Bird explained. “To address this, we are spending more time reinvesting in assisted living spaces so they are a destination and people want to move into them.”
Chicago-based Vi Living owns and operates 10 CCRCs throughout the country in Florida, Illinois, Arizona, Colorado, California and South Carolina. Vi chief financial officer Gary Smith weighed in on how to keep debt low when building new communities and why senior living shouldn’t be an afterthought.
“When all of your cash flow is coming from entrance fees, that cash flow can vary year to year,” Smith said. “It’s all driven by mortality and morbidity unfortunately. The key to success is getting to a stabilized occupancy. Leverage, though, has been a struggle, but we try to pay off all construction debt with entrance fees, so we don’t go in with a lot of debt. We can do this because we have higher end communities with higher entrance fees.”
“CCRCs are not as much needs-based like assisted living or memory support,” said Smith. “With CCRCs it’s more of a discretionary position to take. The home is the biggest competitor we have. Eventually … when seniors move in we hear it was the best decision they’ve made and that they wish they had made it sooner.”
As a management and development company in the senior living industry, Des Moines, Iowa-based Life Care Services (LCS) offers a range of living options for seniors from assisted living and memory care to skilled nursing and CCRCs. The company offers 76 CCRCs in both entrance fee models and rental models.
Chairman and CEO Ed Kenny reflected on the reputation and history of CCRCs over the years as well as why senior living needs to be a “kitchen table conversation.”
“All CCRCs are kind of different. The saying goes you’ve seen one CCRC, you’ve seen one CCRC,” Kenny said. “I’ve heard for three decades that the CCRC is a dinosaur product and that it isn’t sustainable, but I don’t believe that. Decades ago we were all developing CCRCs for nonprofit sponsors but then we realized seniors didn’t care that much about the ownership structure, so we applied the CCRC model to the for-profit side.”
“Senior living is like choosing a college—which one do we want to try out? It’s a conversation that needs to happen around the kitchen table before you actually need to make a decision,” he said. “A CCRC is the best gift you can give to your family or spouse. All of us need to figure out how to elevate the discussion of senior living.”
Written by Alana Stramowski