Welltower (NYSE: WELL) has focused heavily on senior housing in affluent markets, but the Toledo, Ohio-based real estate investment trust is trying to devise more affordable options for the future.
Senior housing will be necessary but out of reach financially for many people as they age, Welltower CEO Tom DeRosa said during a Wednesday morning presentation at Nareit’s REITWeek event in New York City.
“We have to figure out how to drive more affordable products,” he said. “All I can tell you is, stay tuned, we’re very focused on that.”
Technology will play a role in cutting costs to widen the availability of senior living, he believes.
Welltower is collaborating with health systems and payers on the effort to offer a more affordable senior living option, he added.
Last year, the REIT forged a joint venture with Toledo, Ohio-based nonprofit health system ProMedica, to acquire the large portfolio of HCR ManorCare skilled nursing facilities, senior living communities, and home health and hospice operations.
This JV is bearing fruit, helping ProMedica manage the health and costs of its patients, including those that are enrolled in the health system’s affiliated Medicare Advantage plan, DeRosa said Wednesday.
Medicare Advantage has been floated by some in the industry as a potential route to more affordable senior living. These insurance plans, offered by private sector companies utilizing government dollars, have begun to cover certain senior living services. The idea is that MA could defray out-of-pocket costs for care-related services, making it easier for residents to afford rent.
The pressing need for more middle-market senior living was highlighted by recently released research findings from the National Investment Center for Seniors Housing & Care (NIC) and academic institutions. The number of middle-income seniors will almost double to 14.4 million by 2029, and 54% of them will not be able to afford assisted living at today’s market rates, the researchers determined.
While there is indeed a pressing need for a middle-market product, today’s high-end senior living has limited appeal even to those who can afford it, DeRosa noted Wednesday.
“Senior housing is a luxury good that nobody aspires to own,” he said.
With this in mind, Welltower has curated its portfolio, disposing of about $13 billion in assets in recent years. Today, it owns properties primarily in high barrier to entry markets where there is both a concentration of wealth and consumer acceptance of senior living.
“That’s why our performance has been better,” DeRosa said.