Confused by ‘Active Adult’ Talk, Discovery CEO Presents Experiential Living Model

The ongoing discussion within the senior living industry on how to define active adult communities has, at times, made Discovery Senior Living CEO Richard Hutchinson’s head spin.

“When I hear about senior apartments and active adult — having had experience [building] both of them — what we’re talking about is neither and it confuses the heck out of me,” he said.

He does think that there is an opportunity to serve a younger resident, however. Doing so is a linchpin of future growth for Bonita Springs-based Discovery, which is using a combination of data analytics, a la carte services and mixed-use development, Hutchinson said during Senior Housing News’ 2019 Summit in Washington, D.C.  

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Discovery’s model — which Hutchinson is calling “experiential living” — could serve as a benchmark for defining the product and providing clarity for other operators seeking to play in the space, and investors seeking opportunities.

Defining terms

Discovery’s portfolio includes 56 communities in 14 states, offering the full spectrum of care. About 60% of its buildings are independent living or senior apartments. The company is in growth mode, having struck major deals this year with real estate investment trusts HCP (NYSE: HCP), Welltower (NYSE: WELL) and National Health Investors (NYSE: NHI).

Hutchinson feels that the term “active adult” has been used in too cavalier a manner within the industry. It can be used to define senior apartments, which he said is nothing more than multifamily buildings with an age restriction. In other cases, active adult is used as an overarching term for single family homes in planned senior communities such as Sun City or Latitude Margaritaville.

Hutchinson sees opportunity for developers and providers in creating a hybrid of the two models. One thing on which he is certain: senior apartment-style “active adult” plays are more suited for multifamily investors.

“I think it is a loser to play in senior apartments against what I feel is some nudging over from our multifamily brethren. We don’t have the capital resources or intensity to battle them long-term in that space,” he said.

Seasoned, successful investors such as The Carlyle Group and Greystar are among those making moves in the space.

Senior apartments, specifically, take away the service component that makes senior living special, something that Hutchinson is not willing to do. 

Experiential living

Discovery is focusing its model on what he calls “experiential living.” The company is building a stripped-down version of independent living in lifestyle centers — that is, mixed-use developments with “live/work/play” components — and adding a la carte services. 

This allows seniors to enter the space at lower price points — Hutchinson told SHN in April that its flexible lifestyle plans allow someone to enter its communities at prices ranging between $1,800 and $2,300 per month — while addressing industry penetration rates that have remained static overall, and varied wildly in major markets.

Hutchinson believes these penetration rate numbers reflect what the industry is not doing to capture market demand today, and the situation could worsen if providers don’t address it ASAP.

In terms of the nuts-and-bolts of experiential living, the model became possible after Discovery’s business intelligence unit — which was formed in 2016 — parsed the company’s service pricing. This revealed the benefits of a la carte plans and overcame obstacles to implementing them.

“You have to first have a menu of pricing and an understanding of economics before doing a la carte services,” Hutchinson said.

Discovery’s new COO, Bill Sciortino, told SHN in August that today and tomorrow’s senior housing customer wants some level of luxury at every price point, as well as choice in tailoring their personal living experiences.

“The challenge is delivering ‘wow’ at whatever price point that is,” he said. “It will be a challenge to be nimble and understand the costs involved.”

Discovery’s experiential living communities will give residents variety with the added benefit of lowering staffing costs and letting the environment do the heavy lifting in creating the experience tenants seek. One project, Celebration Point in Gainesville, Florida, contains 166 units, with only eight full-time team members. 

“[Our] model takes the best of [senior apartments and independent living],” Hutchinson said. “We call it a stripped-down model of full service independent living, layer in the analytics and a la carte [offerings].”

Those offerings include multiple dining venues with optional delivery service, if residents choose to stay in some nights. These venues include bistros which will be staffed through a national third-party manager, and removed from Discovery’s balance sheet.

Discovery’s model also comes with an in-house, customizable fitness program, Fit Camp, featuring one-on-one personal trainers. These amenities will include a technical component, as well. Residents can use apps and portals to access 24-7 concierge services.

The reliance on partnerships and technology should enable Discovery to meet the goal of delivering a high-quality resident experience on a slimmer balance sheet.

“Overall, the cost is reduced,” Hutchinson said.

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