NIC’s recent acquisition of VisionLTC and the creation of NIC MAP Vision integrates the market-leading NIC MAP^® Data Service with VisionLTC’s best-in-class data for investors, owners, and operators to provide significantly deeper and broader data for industry stakeholders. This article highlights one of the data concepts available to clients.

Key Takeaway: Typically, in seniors housing market feasibility studies, the target demographic is qualified by households or individuals that can afford to pay the minimum or average annual rent charged by a property. Depending upon the property type under consideration, a simple annual income qualification search metric alone may not always be sufficient—and may return different results.

Some Context: Whether a development or acquisition strategy is proactively market-driven by identifying specific markets that meet pre-determined criteria, or reactive by reviewing a specific property’s characteristics (such as size, unit count, asking rents and programmatic features), data on demographic, psychographic, and wealth characteristics of potential new residents is critical. Gathering data on household net worth (“wealth”) can be particularly challenging but is an essential data point in quantifying a target market with accuracy. An analysis of average annual household income in both a primary market area (PMA) and its respective metropolitan area provides insights into the scale of available purchasing power—but understanding household net worth is also crucial to accurately assessing the marketability of seniors housing to prospective residents—especially when average length of stay by property type is considered.

Financial Resources and Length of Stay (LOS)

Typically, in seniors housing market feasibility studies, target market depth is quantified by whether qualified households or individuals can afford to pay the minimum or average annual rent charged by a property. The metrics commonly used are thresholds for income-qualified age cohorts for either households or individuals. Home value is also often considered because the sale of a home may be used to subsidize the cost of residency. However, there is often a considerable difference between a property’s minimum or average rent (annualized) and the average annual income of age-qualified households when including a consideration of the estimated length of stay to determine how long a typical resident’s financial resources will allow them to live at the community.

The income streams of seniors include earnings, pensions and annuities, Veteran’s payments, alimony, Social Security, retirement savings, assets such as vehicles and other investments such as stocks, IRAs and bonds. These income streams alone do not make up all of a household’s financial resources, however. Housing equity net of mortgage debt is an important source of capital often used to support a move to seniors housing. Combined, these financial resources make up net worth. Unfortunately, obtaining net worth data is challenging at best, especially information on the housing equity component. The U.S Census Bureau’s decennial census and its yearly American Community Survey (ACS) do not measure net worth. And, while the U.S. Census Bureau’s Survey of Income and Program Participation tracks a wide variety of wealth-related data points, it does so only at the national level.

According to the State of Seniors Housing 2020 report, seniors housing median length of stay rates vary widely from 4.8 years (58.0 months) for CCRC residents to 1.4 years (17.1 months) for memory care residents. Therefore, net worth data, which considers all of a potential resident’s financial assets, may be a better source in selecting markets in terms of ability to pay a property’s fees for an estimated duration of residency than average annual income based on one year of minimum or average rents alone.

Seniors often combine income and assets (including the proceeds of home sales) to fund residency in seniors housing—and this is especially true for Continuing Care Retirement Communities (CCRCs, also referred to as life plan communities) which typically attract younger, healthier residents who plan to age in place (across the continuum of care from independent living to nursing care) for a longer period of time than residents that enter senior living with higher levels of care needs. In fact, the relatively newly designated term “life plan communities” is based on the concept that most residents in CCRCs are planners and have adequate savings to take them through retirement.

The primary payment source for CCRCs is the resident’s income and assets. Additionally, the value and liquidity of prospective residents’ houses are particularly important factors in their ability to afford an entrance-fee CCRC.

Different Measures, Different Outcomes: CCRCs Example

To illustrate different outcomes in broad market selection based on minimum annual income or net worth, the comprehensive datasets provided by NIC MAP and Vision LTC, powered by NIC MAP Vision, in combination with a unique subset of its 4,000-plus data points related to senior housing demand was used to develop a select subset of the top 929 MSAs across the country (Metropolitan Statistical Areas) based on relative target market depth (excluding supply), quantified in two different ways (Tables A & B).

Pre-Determined Target Market Selection Criteria:

• Age: Households age 75+
• Markets: 4,000 or more Age-Qualified households
• Length of Stay: Data sourced from The State of Seniors Housing, 2020
  • Median, all CCRCs excluding nursing care beds, 58.0 months
• Annual Income (Table A): Minimum, based on annualized average monthly rent at CCRCs in 1Q 2021
• Net Worth (Table B): Minimum, based on CCRC average entrance fee, average length of Stay (LOS), and annualized average monthly rent as of 1Q 2021
  • Includes markets with average home value of senior households equal to or higher than assumed minimum property entrance fee

As shown below, selecting markets for further analysis by ranking the top 20 markets by either the percentage of age-and income-qualified households (Table A) or by the percentage of net worth-qualified households (Table B) yields generally different outcomes (and some similarities highlighted in blue).

Although six markets were common in both scenarios, looking at the top 20 net worth-qualified markets expands the income-based selection to markets that can be reasonably expected to be able to support the typical resident’s entire stay in a CCRC.

Given the diversity of seniors housing property types and levels of care setting combinations, and wide range of specific turnover rates, any market selection exercise or market feasibility study can be made more accurate with net worth data than relying on annual income data alone.

Having access to a variety of data related to seniors housing markets puts you in the best position to make informed decisions. NIC MAP Vision’s deep database of data points allows the analyst to search for any target market with unparalleled specificity—and creativity—and investment decisions with enhanced accuracy.

Interested in learning more about the data used in this analysis?

To learn more about NIC MAP and VisionLTC data, powered by NIC MAP Vision, and about accessing the data featured in this article, schedule a meeting with a product expert today.

The pandemic has not only affected operators and their ability to care for their residents but has also required equity and debt partners to revisit how they look at revenues, expenses and returns. In the latest NIC Leadership Huddle event, hundreds of senior housing and care leaders gathered virtually to hear from industry capital providers. The discussion focused on questions such as: Have capital providers altered their views on underwriting metrics, LTVs, recourse, and rates? Have relief funds provided through governmental programs exasperated or helped expense models? And how will COVID impact the structuring of capital on a go-forward basis?

Facilitator Ann B. O’Shaughnessy, managing director of Healthcare Banking, CIBC, kicked off the discussion by asking Susan Barlow, co-founder & managing partner, Blue Moon Capital Partners, about the several deals her company closed during the pandemic, and how they were impacted. Barlow said Blue Moon had closed about $400 million in debt financing over three deals throughout the pandemic. “The first closing, in April, right in the beginning, was definitely a soul-searching event, there’s no doubt about that…we didn’t know what we didn’t know,” Barlow explained. “We underwrote the equity to account for the risk, we renegotiated the price with the seller…but our lender stuck with us.” Barlow’s group was not asked to make any loan modifications and closed on the portfolio. Barlow added that, “we thought we’d added some protections on the equity side, and it worked out that it was about right. But, at the time we had no idea.”

In another deal which Blue Moon closed in December, during the depths of the pandemic, adjustments were made based on higher expenses, such as labor costs, insurance, and PPE costs. Shortly afterwards, as vaccinations began to take place, lease-up leads started to build. With a deal that Barlow said is due to close in July, lending terms are “very good, relatively speaking.” Barlow noted that all three deals were with the same lender, which, she said, “speaks to the [importance of] having good lending relationships where you know and trust each other going into these kinds of situations.”

Asked about how stabilization has changed, Morgin Morris, senior vice president, KeyBank Real Estate Capital, replied, “The traditional stabilized boxes are kind of gone right now. After 2020, everything is customized. Each deal has a story, and no matter whether performance was strong, our job is to unpack that story and understand what happened at the property in the past year, what the new definition of stabilized looks like for that asset, for that market.” She said they get a lot more granular now, asking questions such as: “Is the facility able to offer shared units? What type of concessions are they looking at? How do they treat companion units coming out of the pandemic? All these are questions we need to dig into a bit more, rather than looking at 85 [% stabilized] as a metric.”

Kathleen P. Ryser, senior director, Seniors Housing Underwriting & Credit, Freddie Mac, agreed that stabilization metrics through the pandemic have changed. She said, “For the first time, in March or April, we started to stabilize an NOI that was less than what had been collected historically, like on a T12 basis, or in 2019.” Ryser said her group started forecasting reduced occupancy and increased expenses, “to come up with an NOI that…was maybe 20%-25% below where the NOI had been.”

Throughout the pandemic, according to Ryser, “We never closed shop. We continued to provide liquidity in the market all throughout 2020.” Today, she sees stabilizing occupancy rates and expenses. “We’re looking at the NIC MAP® data. Move-in and lead activity is telling us that things are going to start improving.” She also noted that Freddie Mac’s senior housing group is having fewer rent collection issues than its larger multifamily group.

The pandemic has also impacted how debt providers look at underwriting. Morris said she’s not looking for “gotcha moments” but is “looking to give clients a reasonable approach to looking at covenants, and taking a reasonable approach as funds came in, whether it was a one-time PPP loan or an ongoing occurrence.” If funds look likely to be sustained over time, such as an increase in a state assistance program, Morris includes them in her “look-forward” analysis.

Asked about how Freddie Mac performed over the pandemic, Ryser quoted hockey great Wayne Gretsky, saying, “we underwrite to where the puck is going, not where the puck is.” She said Freddie Mac adjusted leverage and debt coverage requirements and implemented a forbearance program. “I think we weathered the storm really well,” she said, pointing to a single 90-plus day delinquent loan within Freddie Mac’s $15 Billion portfolio of securitized loans.

On valuations, Morris has seen some changes, such as the delta in underwritten to appraised valuations, which she has seen rise from 2%-5% to 20%-30%. “To me the LTV question, and the divergence, is not likely to go away…we all need to fully understand where the value is derived from,” she said. On that subject, she made the point that operators are “the backbone of maintaining and preserving that value for the owner.” While acknowledging that it is difficult to quantify the value of a great operator, Morris’s group is making an effort to incorporate the quality of an operator into their valuations. She said, “there’s got to be more to the equation than just income, expense, cap rate, and then a bank’s appraisal target.”

Asked about when the industry would fully recover and regain its pre-pandemic momentum, the panelists agreed that, despite positive signs, a full recovery will take some time. Morris said some properties will take longer than others, and pointed to factors such as negative media attention, and rising home values, that she believes will slow full recovery to approximately another 12 months. Barlow agreed, adding, “There’s just a lot of PTSD. If you’re a resident, a potential resident, or a capital markets player, as we come out of this, its going to take some time. But we are seeing the need show up. People that have put off a decision longer than they should have are out in the market. They are touring different communities…the demand is there. I think we’ll see those good operators having success early.”

As the pandemic eases, seniors housing and care operators are looking ahead. What lessons have been learned over the last 15 months to bolster consumer confidence? What strategies will boost occupancy?  

“The question now is whether we can really deliver on lifestyle,” said Ken Segarnick, chief corporate officer at Brandywine Living, a New Jersey-based operator of 32 luxury senior living communities in the Mid-Atlantic. “The game-changer is creating an environment that people want to age into.” 

An industry veteran, Segarnick is among the thought leaders attending the 2021 NIC Fall Conference in Houston. The Conference is NIC’s first in-person convening of leaders in seniors housing and care since the pandemic began and offers a chance to share ideas with others weathering the same challenges.  

Segarnick said the pandemic demonstrated that seniors housing can provide a safe environment. Acts of heroism and courage by the staff helped to protect residents from infection. Communities helped to provide early access to vaccinations.  Data show that resident outcomes have generally been favorable.

The pandemic also highlighted the fact that a senior living experience must include human interaction. Isolation became a huge issue over the course of the disease outbreak. “Human beings need social engagement in order to thrive,” said Segarnick. “As operators, we need to maximize joy and happiness to help residents have a life well lived.”  

Community programming did reach new dimensions over the last year, mostly out of necessity. Residents and families connected in creative ways through technology and social media. The customer experience became more tailored to individual preferences.  

What’s Next? 

The challenge now is to deliver a next-level lifestyle experience incorporating lessons learned. “Senior living is a consumer-driven business,” said Segarnick. “Though healthcare needs will continue to be a key element to senior living decisions, there’s more to what customers are looking for. They want to enjoy living their lives, they want a better experience.” The goal is to wrap the lifestyle experience around the care needs of residents. “Lifestyle is the differentiator,” Segarnick added.

Segarnick defines lifestyle as part choice, part engagement. Giving residents choices, based on their personal preferences, enhances their lifestyle. It could be offering different dining options or touch as small as knowing which newspaper the resident likes. “Small details build broader experiences,” said Segarnick.  

Engagement is also key to a rewarding lifestyle. But true engagement goes well beyond the basic activities on the daily calendar and includes all dimensions of wellbeing to provide joy and social enrichment.  

Segarnick challenged operators to translate the personal preferences of residents into exciting experiences tailored for them. “Our residents want engagement that meets them where they are,” he said.   

Real estate is part of the lifestyle equation post-pandemic. Residents want more space and connectivity with the outdoors. Common areas should be big and open. Residents want larger apartments to enjoy their own space too. “Where people live is an essential element of lifestyle,” said Segarnick.  

He admitted that more work needs to be done to rebuild consumer confidence in seniors housing and care. But he noted, “Consumer confidence is not something marketed or sold, but earned.”  

Post pandemic, consumers want a more robust senior living option, and providing that will have a direct impact on the operator’s bottom line.  

NIC is convening thousands of seniors housing and skilled nursing capital providers, operators, and sector stakeholders for the first in-person NIC event since the onset of COVID-19. The 2021 NIC Fall Conference will deliver an exceptional attendee experience which attendees of NIC conferences have come to expect – but is incorporating a few changes to adapt to the demands of a world still battling a pandemic.

Networking at ‘the NIC’

Veterans of previous NIC Fall Conferences know that ‘the NIC’ is the most efficient, effective single opportunity of the year for building and deepening relationships within the industry. This year will provide all of the opportunities to meet in hallways, at the bar, at the restaurants, in educational sessions, and in meeting rooms set up for the purpose throughout. And as always, NIC is providing numerous structured opportunities for high-quality networking throughout the event, so attendees can focus on pursuing new contacts, deepening existing relationships, and strengthening their networks.

As in previous years, the event will feature abundant networking environments throughout the conference space, including two areas specifically designated as official Networking Lounges. The lounges will also be home to numerous attendee resources, including the Headshot Lounge, Specialty Coffee Bar, Shoeshine Area, and LinkedIn Corner.

The conference will also feature two NIC Social Hour events, for a more relaxed happy hour-like atmosphere.

All attendees who register by October 1 will receive a NIC lapel pin in their pre-conference mailing. This pre-and post-conference icebreaker further extends networking possibilities, increasing the chances of attendees making new friendships and potential business relationships, even as they travel to and from the event.

As always, first-time attendees will be afforded special activities and resources specifically geared to help them successfully navigate the conference, including an orientation webinar, a First-time Attendee Gathering, and morning meetups.

Programming

Educational programming will span all three days of the conference—offering stand-alone, not-to-be-missed sessions on the issues that will shape seniors housing and care organizations for years to come. The program will include interactive discussions and will feature insights and perspectives from nationally prominent thought-leaders, industry veterans, and policymakers on a carefully curated set of topics of the most importance and relevance in today’s world.

New this year, both in service to safety considerations and the need to focus thought-leadership and discussions on the most important issues, there will be no concurrent sessions. Instead, larger spaces will hold a series of general sessions, scheduled not to overlap. For many, the schedule will be a welcome relief from having to choose between two important sessions occurring concurrently.

Subject matter will include many traditional topics, such as policy outlook, valuations, macroeconomic and capital market trends, and debt market trends. Attendees may also wish to hear from experts and insiders on capital for operations, the case for investing in seniors housing, the forgotten middle market, thinking differently about housing for boomers, and, of course, the recovery timeline for the industry.

Safety

NIC is requiring proof of COVID-19 vaccinations for all registered attendees, in the interest of everyone’s safety.

The decision to require every attendee to provide proof of vaccination, to be confirmed through a third-party vendor, may result in a few attendees opting to stay home. But it reflects both a commitment to fight the pandemic and an awareness of the heroic struggles of many attendees – and over a million of their frontline caregivers – who have fought so hard to protect their communities.

Attendees will be required to provide a photo of themselves, which will be placed on their conference credentials. They must also provide proof of vaccination, with the final dose completed no later than  Sunday, October 17, 2021. Once confirmed, submitted documents will be deleted.

Also new this year is the fact that there will be no last-minute or onsite registrations, to allow for the additional safety protocols. NIC is offering no-fee cancellations, up to 30 days prior to the event, to further insulate attendees from the risks of COVID-19. Those who register by October 1 will receive their badges and a PPE kit via mail to reduce queuing and encourage adherence to safety protocols.

Detailed, up-to-date safety information can be found here.

Register Now

This year, given the new safety protocols, attendees must register by Thursday, October 28. As an increased safety measure, onsite registrations will not be accepted for the 2021 NIC Fall Conference. Currently, NIC is offering Early Bird incentives, with significantly discounted rates that will increase on August 16. Don’t miss the most important in-person industry event of 2021. Register yourself and your associates today!

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This past February, M&T Bank Corporation announced its intention to merge with People’s United Financial, Inc. with M&T Bank as the surviving entity. The merger—expected to close in October—brings together two powerhouse seniors housing and care lenders.

The combined company will include about $200 billion in assets, and a network of nearly 1,100 branches spanning 12 states from Maine to Virginia.