First-quarter investment return data for the NCREIF-reported seniors housing properties equaled 2.14%, composed of a 0.79% capital return and a 1.36% income return. The annual total return through the first quarter of 2018 was 12.79%, overshadowing the NCREIF Property Index (NPI) result of 7.12% and the apartment result of 6.38%. However, at 13.53% industrial total returns outpaced seniors housing.

Despite the relatively strong showing, the total annual return for seniors housing has been trending down since mid-2014 when it peaked at 20.37%.   This pattern can also be seen in the broader NPI index and is due to the appreciation return which tends to slow at this point in the real estate cycle.

Looking more closely at the components of total returns, appreciation returns for seniors housing exceeded all major property types on a 10-year basis.  Hotel and office both experienced negative capital returns over this period, while seniors housing had a 3.73% capital return.   More recently, the capital return was 6.94% on a one-year basis, dwarfing all other property types except for industrial, which has benefited from e-commerce which has increased demand for last-mile warehouse space.

With the exception of the hotel sector, seniors housing income returns have also exceeded the NPI as well as the other main property types on both a one-year and a ten-year basis.

These performance measurements reflect the returns of 104 seniors housing properties, valued at $5.3 billion in the first quarter.  This is the first quarter that the market value of the NCREIF universe of seniors housing has exceeded $5 billion.

Newt Gingrich, Larry Summers, Ben Bernanke, and Timothy Geithner have all presented at the NIC Fall Conference in recent years with the sharp observations and timely insights that can only come from top government officials. These speakers provided their unique perspectives to NIC’s seniors housing and care executive audiences.

This year’s upcoming conference continues NIC’s tradition of featuring nationally prominent speakers. NIC has announced that the opening general session of the 2018 NIC Fall Conference will feature a conversation with the former Director of the National Economic Council and the former President and COO of Goldman Sachs, Gary Cohn.

As seniors housing and care navigates a shifting market and evolving economy, its leading decision makers face a number of potential business challenges, such as the impact of a tight labor market, increasing wages, and rising interest rates.

Cohn will share his insights and observations on the U.S. economy and where it is headed as the influences of a changing global economy, more restrictive monetary policy, and tax reform take root. He will also speak to his views on the potential impact of tariffs on trade, the economy, and inflation; today’s very tight labor market, including staffing challenges for business expansions; regulatory, healthcare, and immigration reform; and the direction of interest rates.

Cohn’s insights on where today’s economy is taking us promise to be highly relevant to our conference attendees, while effectively highlighting the 2018 NIC Fall Conference theme: “Navigating the Present Market and Anticipating the Future.”

The 2018 NIC Fall Conference will be held October 17-19 at the Sheraton Grand Chicago. Click below to register.

The Labor Department reported that there were 213,000 jobs created in the U.S. economy in June, above the consensus expectation of 195,000.  This followed an upwardly revised gain of 244,000 jobs in May (originally reported as 233,000) and an upwardly revised gain of 175,000 in April (originally reported as 159,000).  The two-month revision was a positive 37,000 new jobs.  After revisions, payroll gains have averaged 211,000 per month over the past three months and 215,000 per month since the beginning of the year.  In 2017, they averaged 182,000 per month.

The unemployment rate rose to 4.0% in June from 3.8% in May. The increase was largely due to 601,000 workers entering the labor force.  Despite the increase, the jobless rate is still well below the rate of what is generally believed to be the “natural rate of unemployment” of 4.5% and continues to suggest that there will be growing upward pressure on wage rates.  The jobless rate is calculated from a different survey than the survey used to calculate the number of new jobs (the household versus the establishment survey, respectively).

A broader measure of unemployment, which includes those who are working part time but would prefer full-time jobs and those that they have given up searching—the U-6 unemployment rate—rose to 7.8% in June from 7.6% in May but was down from 9.2% as recently as December 2016.  May’s rate was the lowest level in 17 years.  The number of long-term unemployed (those jobless for 27 weeks or more) increased by 289,000 to 1.5 million and accounted for 23% of the unemployed.

Average hourly earnings for all employees on private nonfarm payrolls rose in June by five cents to $26.98. Over the past 12 months, average hourly earnings have increased by 72 cents, or 2.7%.  This is the same as in May and up from 2.5% on average in 2017.

The labor force participation rate, which is a measure of the share of working age people who are employed or looking for work increased by 0.2 percentage point to 62.9%.  Nevertheless, this remains quite low by historic standards, although up from a cyclical low of 62.5% in October 2015.  The low rate at least partially reflecting the effects of an aging population.

Health care added 25,000 jobs in June and has increased by 309,000 over the year.

Separately and earlier this week, the Labor Department reported that 3.4 million workers quit their jobs in April, near a 2001 peak and twice the 1.7 million who were laid off from jobs in April.  Workers are more confident and willing to quit because the economy and the labor markets are strong.  Workers who quit experienced a nearly 30% larger pay increase in May than those who remained in the same job over the past 12 months according to research by the Federal Reserve Bank of Atlanta.

The June jobs report as well as indications that GDP growth was strong in the second quarter will provide further support for increases in interest rates through 2018 by the Federal Reserve. As widely expected, the Fed increased the fed funds rate by 25 basis points at its June FOMC meeting, the second increase in 2018.  The Fed has raised rates by a quarter percentage point seven times since late 2015, and most recently to a range between 1.75% and 2.00%, after keeping them near zero for seven years.  The June projections by the Fed now show a total of four increases in the fed fund rate anticipated in 2018 (two of which have already occurred), up from an earlier expectation of three.  Further increases are anticipated in 2019.  Their projection for the fed funds rate in 2020 is 3.4%.  Hence, it is likely that there will be another 25-basis point increase announced by the Fed at its September and December FOMC meetings.

Tech expert Vivek Wadhwa to speak at 2018 NIC Fall Conference

Global tech entrepreneur, author, academic and advocate, Vivek Wadhwa, will be the 2018 NIC Fall Conference luncheon speaker. Wadhwa will focus on the practical solutions that new technological advances will make possible in the near future. The concept of robots disrupting seniors housing and care, or artificial intelligence and healthcare apps improving property performance may sound like science fiction today, but, according to Wadhwa, the tech innovations that will change the industry are just around the corner.

For those interested in how tech solutions will impact the way they do business, Vivek Wadhwa’s presentation will be thought-provoking and insightful. A Distinguished Fellow at Carnegie Mellon University’s College of Engineering, he is a globally syndicated columnist for The Washington Post and author of several books: “The Driver in the Driverless Car: How Our Technology Choices Will Create the Future”; “The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent”—named by The Economist as a Book of the Year of 2012; and “Innovating Women: The Changing Face of Technology”—a documentation of the struggles and triumphs of women. Wadhwa has held appointments at Duke University, Stanford Law School, Harvard Law School, Emory University, and Singularity University.

In the coming days, NIC will announce our opening general session speaker, a highly sought-after global figure, who will complement Wadhwa’s presentation, and reflect our theme, with a conversation on the U.S. and global economic landscape.

• Occupancy Continues to Fall, Despite Typical Seasonal Influence
• Managed Medicare represents increasingly larger share of skilled nursing revenue

NIC released its first quarter 2018 Skilled Nursing Data Report last week, which includes key monthly data points from October 2011 through March 2018.

Here are some key takeaways from the report:

1. First quarter national occupancy decreased 30 basis points from the fourth quarter to 81.6%, deviating from the expected historical trend which usually shows an uptick in occupancy from the fourth to the first quarter. Occupancy initially increased in both January and February before slipping back in March. March 2018 occupancy was down 210 basis points from the March 2017 rate of 83.7%. Occupancy declined on a year-over- year basis for both urban and rural areas, while it increased for urban cluster properties from the prior quarter.

2. Skilled mix increased at the national level from the prior quarter as Medicare and managed Medicare patient day mix increased 56 and 54 basis points to 13.0% and 6.6%, respectively. This suggests that seasonality did influence the data as higher acuity patients are often admitted during the winter/flu season which in turn often drives an increase in overall occupancy. However, as overall occupancy decreased there may be other factors at play which are offsetting this influence such as pressures on admissions or length of stay. Skilled mix increased across all reported geographic areas in urban, rural, and urban cluster markets. Rural area properties are now at the highest level of skilled mix within the time-series, ending the quarter at 24.4%.
3. Managed Medicare revenue mix reached a time-series high at the national level in February 2018, demonstrating the growing influence of this payor source. Even among rural properties, where revenue mix for managed Medicare is less than half the revenue mix reported in urban areas, the trend is consistent. Rural areas have been less affected by managed Medicare than others, but the trend warrants attention in the years to come, in all geographic areas. The revenue per patient day (RPPD) from managed Medicare continued to decrease from the prior quarter in all areas, except for urban cluster where it increased slightly.
4. Medicare revenue mix increased in the first quarter and was close to the highs of one year ago in urban cluster and rural settings. While the Medicare revenue mix for urban area properties was up quarter-over-quarter, at 23.7%, it was far below previous first-quarter highs of approximately 28% last seen in 2015. Year-over- year, urban area Medicare revenue mix declined 157 basis points from March 2017. It is now down a total of 474 basis points over the past three years.

5. Nationally and consistently across geographic areas, private revenue per patient day continues to increase, with the fastest growth in rate occurring in rural and urban cluster areas. Nationally, private RPPD reached a six-year high of $262 in February 2018 before ending the quarter at $260. Revenue mix for private revenue reached a six-year low at 7.7%, as the share of private revenue continues to drop.

The NIC Skilled Nursing Data Report is available at http://info.nic.org/skilled_data_report_pr. There is no charge for this report.

The report provides aggregate data at the national level from a sampling of skilled nursing operators with multiple properties in the United States. NIC continues to grow its database of participating operators in order to provide data at localized levels in the future. Operators who are interested in participating can complete a participation form at http://www.nic.org/skillednursing. NIC maintains strict confidentiality of all data it receives.