A new report is offering solutions on how senior living operators can better tackle affordability and create communities that middle-market consumers can live in.
Published by the Milken Institute in partnership with the National Investment Center for Seniors Housing and Care (NIC) and CVS Health, the report outlines ways operators, property owners and stakeholders can help make senior living more affordable for all.
From identifying the “forgotten middle” to the value-based care movement, senior living operators have started to consider more middle-market development despite tight margins and longer wind up in generating revenue.
The report calls for action ahead of a “likely influx of distressed senior housing properties needing repositioning and capital expenditures ahead of a potential foreclosure crisis.”
The report’s four solutions are:
*Establishing an advisory council to refinance and rehabilitate distressed properties
*Designing a revolving loan fund to create long-term capital for future renovations or affordable projects
*Using a pay-for-performance model to attract investment, deliver long-term cost savings to offset care costs
*Launching a regional pilot program to create partnerships with operators and payers in value-based care.
A “significant inventory” of properties that will face financial trouble in the next 12 to 24 months, according to the report. Indeed, the senior living industry faces a wave of debt maturities in the coming year to the tune of billions of dollars.
The report proposes a multi-phase pilot program to act between lenders and buyers to facilitate redevelopment and serve for the betterment of middle-market senior living residents.
By creating a revolving loan fund, future middle-market projects could become more commonplace with readily available access to capital. This would in turn meet future demand and help lower the borrowing cost for developers that could result in lower prices per-unit on projects, the report notes. What those structures look like vary, including a “subordinated type of financing whose repayment would follow the senior tranche.”
With a pay-for-performance model, middle-market projects could attract private investment with identified social outcome improvements based on predetermined factors, the payer would repay investors with interest. If the outcomes are not met, investors would lose principal investments.
“The social outcomes that owners and operators of affordable senior housing communities generate by providing safe and healthy residential environments can translate into significant cost savings for insurance payers,” the report states.
While operators have large swaths of resident data at-hand across a portfolio, they often can’t translate that data into actionable insights, the report notes. Data are not yet able to allow operators to demonstrate a cost benefit to implementing new smart technology to insurers, regardless of the benefits being currently observed at the community level.
In the report, participants said operators should create a “broad data standardization project” to accelerate the creation of relationships across the senior living industry, the report said. The data standardization project would allow operators to demonstrate the value of senior living and care to achieve new investment and increase resident care offerings.
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