Ryan Cos. Dives Deep Into Market Study Data, Finds New Clues to Senior Living Success

Ryan Companies recently did a deep dive into the market study data that the firm has accumulated since entering the senior living sector about eight years ago — and the Minneapolis-based development, architecture and construction company discovered some surprising findings.

Those findings and a new approach to data analysis will help drive the company’s growth in senior living coming out of the pandemic, SVP of Senior Living Julie Ferguson told Senior Housing News.

Ryan Cos. also recently surveyed more than 20 senior living operators and developers about how Covid-19 might influence building design going forward, and is drawing on those lessons in forward planning as well.

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Data-driven development

Since 2010, Ryan has built about 20 senior living communities encompassing more than 2,500 units and has an active pipeline underway. Within just the next six months, the company has four communities slated to open, in Iowa, Missouri, Texas and Wisconsin.

After joining the firm in 2019, Ferguson recognized that Ryan had accumulated a wealth of data. In particular, she was interested in how the companies’ projects actually performed, compared to expectations set from initial market studies.

“We deconstructed every market study we had,” Ferguson said.

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She and her team also categorized each senior living community, depending on whether the project had exceeded expectations, met expectations, or fallen short. They considered metrics such as meeting budgets, lease-up timeframes and net operating income (NOI).

Comparing the market study data to the communities’ performance yielded “a lot of obvious findings” but also some that were more surprising, Ferguson said.

For example, one of the biggest predictors of a project’s success was the ratio of rental rate to consumer income. If a project was charging rent at say, 12% to 15% of income, it tended not to be as successful as projects charging 5%.

“We think about that, because we income-qualify people, but then we don’t take that next step and say, well, how much of their income are we expecting them to spend on our rental rates?” Ferguson said.

This metric emerged as more indicative of success than the more common focus on median home values in a given market. Ferguson speculates that median home value might be less important than in the past because more boomers are already renting — say, in an active adult community — before they make the move to independent living or assisted living.

Another metric that seems predictive of success is a market’s population of people aged 80 or older. That is intuitive, but some market studies look at the population growth of the 75 to 85 cohort and the 85-plus group, which can cloud the picture, Ferguson said.

One other finding: Market studies might predict that a given area can support several new senior living communities, but fail to account for the competitive pressures that will come into play as new supply enters around the same time. Ryan’s data analysis showed that projects in these crowded markets did indeed lease up, but due to price competition, their net operating income wasn’t as high.

All these findings are far from scientific, Ferguson emphasized, but they do give insights into trends and raise flags that Ryan would do well to heed in the future. And the data exercise also played into the company’s larger goal, which is to do market studies in-house.

“I want our team to do this in one to two days rather than four to six weeks,” Ferguson said.

To support the company’s data-related goals, Ryan has recently added to its senior living team, hiring an asset management business analyst and a senior real estate analyst.

Internal market studies would be corroborated by studies from third parties, which often are required by lenders and investors. But Ferguson wants to be able to move more quickly on opportunities, and be able to rely on data-driven decision-making.

That might be especially important as Ryan branches into different segments of the market. The company has focused on high-end properties but is also now targeting the upper middle-market. To that end, Ryan partnered with Great Lakes, a Minneapolis-based operator with a history of success in secondary and tertiary markets.

“We appreciated that operating discipline, to have a great margin but lower rental rate,” Ferguson said.

At any price point, and regardless of the demographic and economic dynamics of a given market, a quality operator is key to a project’s success, she said.

Post-pandemic designs

Operational skill has never been more important than during Covid-19, and Ryan’s operators were well-positioned to weather the pandemic’s challenges, according to Ferguson. They were able to rely on their infectious disease protocols and implement the best practices that were put in place industry-wide, while Ryan supported them with equipment, information and other resources.

Above all, being “flexible” was an important attribute to getting through the hardest periods of 2020, Ferguson said. There is no single building element that would have “made the difference” in combating the pandemic, but Ryan’s recent survey did highlight what design elements worked well and where there is room for improvement or new approaches going forward. The company has done an inventory of existing buildings to determine what projects should be immediately prioritized and what should be included in longer-term CapEx plans.

“The one thing everything kept coming down to was air quality,” Ferguson said. “How is the air quality maintained? What is the best air quality to have based on the science of not having particles being dispersed through your air handling systems?”

The good news is that there are several after-market products that can be installed in senior living communities to improve air quality, that are not cost-prohibitive.

Surveyed operators were interested in systems such as HEPA filters in HVAC systems, which run to only about $100 to $200 per unit. Costlier systems, such as needlepoint bipolar ionization, run to about $2,000 per unit.

Other upgrades include touchless doors and faucets, and antimicrobial surfaces. Such additions serve both a practical infection control function but — importantly — also serve a marketing function, of demonstrating to prospective customers that a community is responsive to the pandemic and taking steps to safeguard resident health, Ferguson said.

On this point, she cited the example of Delta Airlines. Ryan recently hosted a webinar with Delta — which has a major hub in Minneapolis — and learned about the airlines’ approach to maintaining and increasing consumer confidence. As is the case with senior living communities, Delta added some new capabilities and precautions but also took steps to increase customers’ awareness of the air purification and other safety systems already in place.

“What we discovered from Delta is a lot of it’s just about information, explanation and gaining the customers’ trust that you have their best interests in mind, in all the decisions that you’re making,” Ferguson said.

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