Popular NIC Talks series returns to fall conference

Today’s disruptive innovations often determine the future. Uber has upended the transportation business. Amazon changed retailing.

The same holds true for the concept of aging. Disruptive innovations will change the future of the aging experience and drive how society responds to the needs of an aging population in the years ahead.

With this in mind, the future of aging will be highlighted this year at NIC Talks. The popular series of 12-minute TED-style talks returns for a fourth time to the 2018 NIC Fall Conference, Oct. 17-19, Sheraton Grand Chicago.

Over the course of two days, NIC Talks will feature eight thought leaders, primarily from outside the industry, who will address the topic, “How Am I Changing the Future of Aging?”

NIC Talks will be presented during sessions on Thursday afternoon and Friday morning. NIC Founder and Strategic Advisor Bob Kramer will moderate the program.

Speakers will not specifically focus on seniors housing, noted Kramer. “Instead, they will present the innovative trends that will disrupt the future of aging and aging services.”

NIC Talks will address several broad themes: culture and workforce issues; artificial intelligence and applied technology; and quality of life and caregiving. Here’s quick preview of some of the topics and speakers.

Culture and workforce issues

As the industry grapples with a shortage of workers, several speakers will provide new insights into the issue. As Kramer noted, “It’s not just the lack of caregivers.” The industry needs to connect with workers on a deeper level in order to recruit and retain talent.

NIC Talks speaker Dwayne J. Clark will spotlight the importance of company culture. As co-founder and CEO of Aegis Living, Clark has created a culture of innovation based on its most important asset: its workers. He will detail his successful approach, which has led to innovative architecture, a nonprofit that supports employees in need, and fun and unusual ways they reward employees.

Chinwe Onyeagoro will provide insights into how to create a high-trust, high-performing workplace culture. Onyeagoro’s analytics firm, Great Place to Work, studies more than 10,000 organizations a year. She’ll present new research on workplace trends in the senior living industry and share the impact of high-performing cultures that inspire a sense of purpose.

Speaker Kelly Leonard from The Second City—Chicago’s famed comedy/improv theater—will share current research using improv techniques to improve interactions with people with dementia and Alzheimer’s. Leonard will share how learning this application improved his end-of-life interactions with his brother Kyle, showcasing the power in caregivers applying these techniques.

Artificial intelligence and applied technology

Technology has the ability not only to provide a better quality of care, but a better quality of life, noted Kramer. He foresees a time when technology will allow medical practitioners and caregivers the opportunity to spend most of their time interacting with residents instead of on administrative work. “Technology will have a huge impact on frontline workers,” said Kramer.

As Chief Technology Officer at NEST—Google’s smart home technology company—Yoky Matsuoka is one of the nation’s thought leaders on advances in intelligent home automation. At NIC Talks, she will highlight the challenges of building technology that seamlessly blends into people’s lives, and discuss specifically how this technology is being adapted to assist elders.

Renowned tech consultant Chetan Sharma will explore the idea of aging in place amid a significant technological shift to connected intelligence. He will describe how sensors are providing tremendous amounts of data on daily life and how intelligent software is helping us understand that data. This combination of sensors and software is dramatically altering industry after industry, and will shape aging and care in the coming decades.

Quality of life and caregiving

“Quality of life involves much more than just good quality of care and good health outcomes involve much more than good medical care,” noted Kramer. “We need to think about the social determinants of health.”

Two speakers will address quality of life issues and their impact on health and healthcare costs.

Lisa Marsh Ryerson is president of the AARP Foundation and a noted expert on social isolation. She will discuss loneliness—which from a health impact standpoint is the equivalent of smoking fifteen cigarettes a day. Loneliness leads to depression, and depression leads to the worsening of chronic conditions—all of which can be helped by community engagement.

Speaker Susan Dentzer will talk about the key trend of hospital at home, which will have major repercussions on the role of seniors housing in elder care. Dentzer is CEO of the Network for Excellence in Health Innovation, a nonprofit organization seeking intelligent ways to advance healthcare at reasonable costs. She will provide a look at healthcare without walls, how seniors housing can prepare and participate, and the impacts on health outcomes with this approach.

“Healthcare and eldercare will be understood differently in the future,” noted Kramer. He added that NIC Talks is a provocative forum where conference attendees can get a glimpse into the future and challenge their own thinking about aging and aging services. “These ideas will transform the aging experience,” he said.

Learn More

As challenges persist in both skilled nursing and seniors housing fundamentals, pricing trends have differed over the past couple years. We have seen a decrease in the price per bed in the skilled nursing sector.  But at the same time and even with today’s more challenging operating environment, seniors housing price per unit has been relatively steady which shows that buyers are bidding at relatively high pricing levels for seniors housing properties.

In the second quarter of 2018, seniors housing price per unit increased to $175,600, returning to the levels seen in the first quarter of 2017. The price per unit was up 4.3% from the first quarter of 2018 when it was $168,300, and up 1.7% from the same period last year in the second quarter of 2017 when it was $172,600. It is now up 200% from the time-series low, set in the second quarter of 2010, representing a 14.7% annual growth rate in price per unit since that time.  For seniors housing, it has been quite a good run in terms of price appreciation, not unlike the runup experienced with most asset classes since 2010.

Skilled nursing trends over the past couple of years (“nursing care” in chart below), have been different than the trends seen in seniors housing trend.  The price per bed for skilled nursing stood at $84,200 as of the second quarter 2018 which was a 8.7% drop from two years ago when the price per bed was $92,200 in the second quarter of 2016.  Over the past quarter, skilled nursing saw a slight uptick from $83,700, but when compared to a year ago in the second quarter of 2017, price per bed is down 12.1% when it was $95,800.  However, it is up 73% from the series low of $48,700 in the first quarter of 2009.

Switching gears and looking at the buyer composition through the second quarter of 2018, the total dollar volume closed across all buyers was $5.1 billion. The private buyer has been the most active participant so far, representing almost half of the closed volume (45%), at $2.3 billion through the second quarter of 2018 and averaging more than $1 billion a quarter. For comparison purposes, the private buyer represented 34% of total volume in 2017, registering $5.5 billion. However, the private buyer volume did decrease 42% from the first quarter to the second quarter of 2018 from $1.5 billion to $800 million.  Private volume for the second quarter of 2018 decreased 38% from the second quarter of 2017, when it totaled $1.4 billion.

For more information on transactions activity, please look at the September NIC Insider.

In addition, to hear more about valuations and the buyers in the market, please come to our NIC Fall Conference session “What’s It Really Worth?”.  To find out more please visit the NIC Fall Conference website.

Seniors housing is a multifaceted property type in commercial real estate, in part, because it is comprised of several different housing and care products designed to meet the diverse needs and desires of the older consumer. Product segments range from independent living, which focuses on hospitality and lifestyle services for healthy, active seniors, to assisted living for residents who are not fully independent and need help with daily activities, to memory support and nursing care units, which provide residents round-the-clock licensed, supervised medical care.  Any of these product segments may be found as a stand-alone building, and they are frequently combined in one or two buildings or clusters of buildings to form a campus of continuing care.

The following analysis details care segment performance in the Primary Markets since the most recent market cycle peak that was reached in the fourth quarter of 2014. The analysis looks specifically at the changes in occupancy, average annualized asking rent growth, and inventory growth for the independent living, assisted living, memory care and nursing care segments. Care segment-level data is available in the CBSA Trends report in Batch Data Files through the NIC MAP® Client Portal.

Seniors housing fundamentals: recent peak

For context, the chart below shows seniors housing fundamentals in the Primary Markets since the first quarter of 2006 through the second quarter of 2018. Seniors housing is defined as majority independent living and assisted living property types (the latter includes memory care but excludes nursing care). “Majority” property types are designated by the segment that comprises the largest share of a property’s inventory mix. For example, a 100-unit property with 60 independent living units, 20 assisted living units and 20 memory care units would be classified as majority independent living. Peak and near-peak occupancy rates were reached in the quarters leading up to the Great Recession, and more recently, in the second half of 2014, when the occupancy rate hovered around 90% for several quarters. In the beginning of 2016 the seniors housing occupancy rate began a 10-quarter decline as inventory growth outpaced absorption, falling to 87.9% as of the second quarter of 2018. This was the lowest occupancy rate in seven years.

Segment performance

So how have seniors housing and care segments performed since the recent market cycle peak? While all segments saw declines in occupancy from the fourth quarter of 2014 to the second quarter of 2018 due to inventory growth outpacing absorption, the independent living segment performed the best in terms of occupancy and average annualized asking rent growth. The memory care segment had the weakest comparative performance, overall, with the strongest change in inventory, which put pressure on the segment’s occupancy rates and rent growth.

• The independent living segment had comparatively moderate inventory growth (5.7%), and largely sustained occupancy growth (-0.3 percentage points, from 91.0% to 90.7%), which allowed average annualized asking rent rates to rise faster than at the other segments during the period (3.2%). Independent living also had a significantly higher level of occupancy at 90.7% in the second quarter of 2018 than did the other segment types.
• The memory care segment had the highest inventory growth (33.6%), the largest decline in occupancy (-5.1 percentage points, from 87.8% to 82.7%), and the lowest average annualized asking rent growth for the period (2.5%). It is worth noting, however, that the inventory base of memory care is relatively small, which can partially explain the large inventory growth rate of 33.6%. Compared with the other segments, memory care had the lowest overall occupancy rate in the second quarter of 2018 (82.7%), falling to its lowest level since NIC MAP began reporting the data in the fourth quarter of 2005.
• The assisted living segment experienced higher inventory growth than independent living but lower inventory growth than memory care (11.5%). Occupancy declined 3.5 percentage points (from 90.2% to 86.7%) for the segment (also falling to its lowest level in the time series), but average annualized asking rent growth for the period (3.1%) was similar to independent living.
• The nursing care segment had the weakest inventory growth (-0.4%), a 2.0 percentage point decline in occupancy, and an average annualized asking rent growth rate of 2.7% for the period.

This analysis has provided a broad overview of the relative performance of the different seniors housing care segments in the Primary Markets. However, it just scratches the surface of the analytics that can be developed for market area, regional, metropolitan and county-level insights. Further analysis on this topic is available to NIC MAP® clients in the NIC MAP client Insights Newsletter.

Will technology really help provide care solutions for the seniors housing and care sector? According to the 2018 NIC Fall Conference lunch speaker, new technology will have a huge impact on care—and sooner than you may think. Global tech entrepreneur Vivek Wadhwa is well-known for his ability to predict and describe revolutionary technological advances long before they transform our lives. His book, The Driver in the Driverless Car: How Our Technology Choices Will Create the Future, details emerging innovations and makes a strong case for embracing them. We talked to him about his upcoming presentation and how seniors housing and care stakeholders may benefit from his insights. What we can expect is this—the next few years will bring profound changes to the seniors housing and care sector, as a host of breakthrough products and services simultaneously enter the market.

NIC: What’s your message for the seniors housing and care industry?

Wadhwa: Within five years, our smart phones will have the same computing power as our brains. Then they’ll continue getting smarter. Because of advances in computing, artificial intelligence (AI) and sensors, the robots we imagined from pop culture and Sci-Fi are now becoming a reality. The sensors in our rooms, working with AI and the devices we carry in our pockets, will deliver personalized healthcare. We’ll literally have AI talking to us, telling us how we should live healthier lives. The advances we might have imagined growing up are now becoming a reality. It’s not science fiction any more.

NIC: Do you have a key takeaway for this audience?

Wadhwa: The strongest use of this technology is for serving and caring for the elderly. To the extent that operators and investors learn about these technologies, they can provide better care to the elderly, and can enhance the services they offer, all while improving operational efficiencies. They can make lives better.

Also, the largest growth market in the next five to ten years will be caring for the elderly.

NIC: Will this technology address major issues, such as staffing shortages, wage growth, and adapting to the value-based payment system?

Wadhwa: With intelligent devices such as Alexa actively monitoring and assisting individuals, you need less human labor. For example, imagine within every property, a diagnostics device that can perform many of the same tests as a hospital. It then connects directly to a doctor on a smart phone, providing all the necessary information for prescribing medications and delivering instant advice. This type of technology, which is already available in other countries, will reduce costs, improve efficiencies, and take care of the human element, improving outcomes.

NIC: Will you have specific examples?

Wadhwa: I will walk my audience through a variety of technologies—from AI and robotics to sensors, digital medicine, even self-driving cars. I’m going to give a timeline for what this means to them and when they can expect to see these in the market. Forget Uber. The biggest opportunity for self-driving cars will be transportation for the elderly—they will be the biggest beneficiaries of that technology, because they need it the most.

NIC: What piqued your interest in this topic?

Wadhwa: We’re all getting older. I’ve had many debates about what we’re going to do about caring for the elderly—particularly when they’re the majority of the population. There won’t be enough young people to care for them, therefore you will need technology.

NIC: How will new technology address labor issues?

Wadhwa: We’ve seen nothing yet. In the next five to ten years, we’ll see things get harder. Current labor issues are a small taste of what’s coming. Investors need to double their investments and not back off. In the long term, this sector is where the money will be made.

NIC: What’s the most significant innovation coming?

Wadhwa: If there was just one, this would be a very simple talk. The advances in computing are driving a host of technological breakthroughs, at an exponential pace, all at the same time.

NIC: If you had to pick one new technology, to have the most impact on the seniors housing and care industry, which would you select?

Wadhwa: For the elderly, I’d pick AI/robotics. These will be basically the same technology—devices that can do the work of a human being. They’ll have a huge impact on this industry. This category will include cars, drones, and a host of other intelligent devices.

NIC: What should investors, developers, owners, and operators do to prepare for these changes?

Wadhwa: They have to learn about these emerging technologies. Look at the demographics and the market opportunity. They need to think about how they can provide better services and efficiencies with what’s coming.

Are there resources you would point these stakeholders to?

Wadhwa: Well, here’s where my book, The Driver in the Driverless Car: How Our Technology Choices Will Create the Future, comes in. For this sector, it’s a must-read. It walks them through all of these things and tells them what it means for their lives.

NIC: How will all this technology change the experience of a senior resident, say in an assisted living facility?

Wadhwa: Seniors will live healthier, more engaged lives. Virtual reality advances will take them into new experiences, and new parts of the world. Life-like experiences will enable seniors to virtually travel. This technology is currently flimsy—it’s just for techies right now, but in five years, it will be like accessing a new reality. Five years is not that far away. In so many ways, the lives of seniors will improve.

How do you think your message will resonate with this audience?

Wadhwa: By the time I’m done, their heads will be spinning. They’ll be blown away and should feel very excited—and a little bit scared.

Registration now open

Back by popular demand, the 2018 NIC Seniors Housing Boot Camp, The Art of Assessing a Deal, will be held Wednesday, October 17 from 10:00 am – 2:00 pm at the Hyatt Centric Chicago. Boot Camp is an interactive workshop for professionals looking to familiarize themselves with the unique aspects of investing in seniors housing real estate.

This year, Boot Camp has been expanded to allow thought-provoking discussions from experienced industry experts who will review essential tools they use for successful deal making. The expanded half-day workshop has been designed to provide participants the opportunity to join the conversation and take part in comprehensive discussions reviewing current market conditions and trends, critical analyses that assess opportunities, and other important operational considerations.

Using recent NIC Map® data, participants will be immersed in a discussion on current seniors housing market fundamentals and trends, transactions volumes and valuations. Building upon this groundwork, boot campers will then actively participate in a discussion of a seniors housing property acquisition opportunity using a real-life offering memorandum (OM) that focuses on the operation of a property.

Expert facilitators will share perspectives on important topics such as analyzing market supply and demand, determining the investment thesis and strategy, and learning how buyers can access capital to finance the acquisition. After the deep dive discussion on the elements of assessing an opportunity, the workshop will focus on how operational strategies such as labor, staffing, sales and marketing can affect the property’s occupancy, net operating income, and valuation. These discussions will focus on current challenges facing seniors housing operators and provide tips for success.

The session culminates in an opportunity for boot campers to apply the knowledge gained in the workshop to develop a bid and compete to purchase the property.

Boot camp participants will leave with a better understanding of what to look for, how to assess an opportunity and then decide if they should bid, sell or walk away from a hypothetical opportunity.

New to the workshop this year, industry icon Bob Kramer will share current industry insights.  His presentation will provide his thoughts on the future of seniors housing and care and offer insights on the opportunities as well as the challenges facing investors today.

Join us. The 2018 NIC Senior Housing Boot Camp will provide participants tools for deal assessment as well as a great opportunity to network with colleagues and experienced industry thought leaders.  We hope to see you and your colleagues there!

We invite you to learn more about the facilitators and  how to register. (Space is limited.)