Two developers share lessons learned. 

As the active adult rental segment attracts more investors amid a quickly growing pool of potential customers, a highly interactive session at the 2024 NIC Spring Conference took a deep dive into the product type. Two broad-reaching case studies of successful strategies were highlighted. The audience was also polled throughout the discussion for their input. 

The session was led by NIC Senior Principal Caroline Clapp, NIC’s subject matter expert on the active adult rental sector. It is one of the key focus areas of NIC’s strategic plan to increase data and transparency in the segment.  

Joining Clapp on stage were two veteran active adult developers: Jane Arthur Roslovic, CEO and co-founder of Treplus Communities; and Robert May, managing director of Avenida Partners.  

Putting the discussion in context, Clapp noted that NIC MAP Vision tracks 540 active adult properties with 80,000 units nationwide. The penetration rate among potential residents is less than 1%. 

Clapp identified four key factors in a successful active adult strategy:  

• Understanding the consumer;  
• Choosing a product type, design, and location conducive to downsizing;  
• Selecting amenities and activities distinct from traditional multifamily products; and 
• Implementing and maintaining a strong sense of hospitality and brand. 

Understanding the consumer comes first. “We can’t do enough research,” said May, whose company has been building active adult communities for 14 years. When choosing a location, he focuses first on the demographics, mostly baby boomers.  

About 60% of residents come from a seven-mile radius. In his experience, baby boomers have high expectations but need to be educated about the product and lifestyle.  

In audience polls, attendees indicated that demographics and opportunities for product diversification were most appealing in the space and that multifamily expertise would best transition to active adult, followed by senior housing. Both Roslovic and May cautioned that neither multifamily nor senior housing expertise were a simple transition into active adult. “Our customer is very discerning,” added Roslovic, whose company has five projects in Ohio. “They are usually coming from a home and think hard about where to spend their money.” The Treplus strategy is to select three sites in a metro area. The company builds communities with roughly 120 single-story cottages. “Municipalities are getting more difficult to deal with,” noted Roslovic.   

Both developers emphasized the importance of working with a local team of attorneys, engineers, and construction crews. Another key is understanding the area’s culture and consumer preferences.  

Active adult communities should be located near retail shops and service providers.  “I like in-fill locations,” said May. “It’s all about activity, connectivity, and accessibility.” 

Rental rates are market dependent. But generally, Treplus apartments are priced 20% over multifamily products and 40% under independent living products. 

May looks at the same data but generally uses other active adult project pricing as a reference point.  “It’s all about selling the value proposition,” said May. Active adult is not a need-based product, he added, but the consumer wants to feel like they will be happier and have more fun at the community.

Desirable Tenants 

The active adult tenant profile is attractive to potential investors. Residents typically rent for a period of 5-10 years, lengthier than both traditional multifamily and independent living residents. Compared to traditional multifamily, active adult residents generally are quieter; timelier with payments; and less destructive of property due to lower turnover. “They’re not as sensitive to rent increases either,” said May.  

Most renters are downsizing from bigger homes, and designs should take that into account. Communities feature large apartments or attached cottages or villas. Units have lots of storage but no stairs.   

A hospitality approach is key. Both developers agreed that successful lease-up and operations largely depend upon the on-site lifestyle coordinator.  “You can’t sell the lifestyle without a lifestyle coordinator,” said May. “They are a critical part of the value proposition.” The lifestyle coordinator also provides a tenant feedback loop to the leasing office and property manager, further bolstering residents’ hospitality experience.   

Treplus has a resident activity committee that works with the lifestyle coordinator to put programs together. The company has one lifestyle coordinator that serves the organization’s four communities in Columbus, Ohio, and its newly opened community in Dayton. A sixth community is planned for Columbus.   

The final audience poll asked attendees for their largest barrier to entry or expansion in the active adult rental space, and access to capital was the first choice, followed by consumer education. 

Both developers agreed that pre-leasing is important and begins well before construction. “Education is key the minute you pick the site,” said Roslovic. Both developers build the community clubhouse first, which operates initially as a space for leasing and events. Stabilization at Treplus properties takes 24-36 months from groundbreaking.  

Avenida has an informal partnership with Greystar to handle property management. Treplus takes a different approach and self manages its properties.  

Both developers believe the active adult rental segment will become institutionalized as the capital markets improve and more investors recognize the opportunity. “There is demand out there,” said May. 

In the dynamic world of senior living, the partnership between operators and owners holds the key to transforming ordinary buildings into vibrant, thriving communities.

Operators are tasked with managing relationships with various owners, each with their unique needs, expectations, and strategic objectives. Conversely, owners oversee multiple operators, each bringing their distinct management styles, market insights, and operational approaches to the table.Success in senior living lies not merely in the individual efforts of operators or owners but in the seamless alignment of visions, strategies, and growth goals between these crucial stakeholders. 

The Heart: At the heart of every high-performing operator-owner partnership lies a foundation of continuous and open dialogue. This goes beyond addressing issues as they arise; it involves maintaining a constant flow of communication characterized by transparency, mutual respect, and collaboration. Whether it’s sharing successes, addressing challenges head-on, or providing regular updates, fostering a culture of open dialogue creates an environment where everyone is kept informed and aligned with the overarching objectives. 

At the operational level, transparent communication channels play a pivotal role in ensuring effective relationship between operators and owners. Operators possess valuable insights into day-to-day activities, resident satisfaction, staffing dynamics, and service delivery optimization strategies. By facilitating open dialogue around these operational insights with owners, operators enable their owner-partners to gain a deeper understanding of the operational intricacies and how they translate into financial performance. This mutual exchange of open communications empowers owners to make informed decisions, offer strategic guidance, and actively participate in driving operational excellence. 

The Core: Collaboration serves as the core of success in the operator-owner relationship. It involves more than just recognizing each other’s expertise; it requires a shared commitment to working together, leveraging complementary strengths, and aligning actions with collective goals. Collaboration isn’t merely a buzzword—it’s the secret that transforms individual efforts into collective achievements. By bridging the expertise of operators with the strategic vision of owners, collaboration creates a synergy that propels the partnership forward and drives sustained success in senior living communities. 

True collaboration emerges when owners demonstrate confidence in operators by entrusting them with operational data and insights. By leveraging critical data such as occupancy rates, resident demographics, and care outcomes, operators fortify their ability to drive performance improvements, implement data-driven strategies, and deliver superior outcomes for residents and stakeholders alike. This provides owners with confidence in current and future financial outcomes through informed data sharing. This trust-based collaboration fosters a sense of partnership, mutual accountability, and shared ownership of outcomes, laying the groundwork for long-term success and growth. 

Movement for Success: To propel these relationships toward success, implementing practical measures is vital. Here are five simple, yet effective steps to consider: 

1. Establish Routine Communication: Regular calls foster open dialogue and trust.
    
2. Implement Reporting Cadences: Introduce regular reports for transparency and accountability outside of required financials.
   
3. Share Industry Insights: Provide trend insights for proactive strategy adjustments.
   
4. Develop Annual Business Plans: Collaborate on strategic objectives and metrics annually. 
   
5. Conduct Annual Review Meetings: Reflect on performance, celebrate achievements, and plan for growth. 

Building a robust operator-owner partnership requires a comprehensive approach rooted in understanding, communication, collaboration, and trust. Mastery of these crucial elements cultivates a partnership that transcends individual interests, nurturing a culture of innovation and excellence.  

Through this synergistic approach, stakeholders enhance the performance of senior living communities, enrich residents’ lives, and contribute to the broader community’s well-being. By deepening their commitment to open dialogue, collaboration, and trust, stakeholders unlock the relationship’s full potential, propelling sustained success and growth in the evolving senior living sector. 

On May 21-22, 2024, NIC will host its second-annual Data & Analytics Conference. This year’s Conference Chair, Justin Hutchens, EVP Senior Housing and Chief Investment Officer, Ventas, shares his thoughts on the upcoming gathering and what attendees can expect at this year’s event.

NIC: This is the second year for the NIC Data & Analytics Conference. What sets this conference apart from other industry conferences?  

Hutchens: This conference is the first of its kind focused on the behind-the-scenes technical expertise that ultimately drives management reporting and analytics. 

NIC: What can attendees most look forward to when we all convene in mid-May?  

Hutchens: Attendees should leave informed and inspired to elevate their approach to creating and utilizing data analytics to support successful outcomes in their senior housing business. 

NIC: Do you have other thoughts you would like to share as individuals think about the value of attending the NIC Data & Analytics Conference?  

Hutchens: I encourage data scientists, analysts, and their respective leaders to attend the conference and be part a of the exciting early stages of advancing senior housing analytics. 

For more information on the NIC Data & Analytics conference, and to register, click here.  

The 2024 NIC Spring Conference saw a dynamic convergence of senior living operators and technology companies at the Innovation Lab, “Enhancing Health Outcomes Through Innovation: Tech-Enhanced Senior Living.”

Led by Moderator Abby Miller Levy, Managing Partner & Co-Founder of Primetime Partners and vice chair of NIC’s AgeTech Committee, and featuring panelists Amy Silva-Magalhaes, COO of The Bristal Assisted Living, and Greg Furst, Technology M&A Strategy Consultant at Omega Healthcare Investors, the session aimed to explore the transformative potential of technology in senior living. 

Abby’s strategic approach to kickstart the dialogue included polling session attendees, which uncovered a notable presence of tech vendors. This established the foundation for an insightful discussion on the best approaches and challenges with technology implementation, the complexities of the relationship between technology companies and senior living partners, and the emerging technologies making waves in the senior housing and care industry. 

The panelists shared invaluable insights into the strategic prioritization of technology roadmaps. Mr. Furst emphasized aligning tech investments with organizational goals, underscoring the importance of budgeting, estimating costs, and assessing ROI. Ms. Silva-Magalhaes complemented his suggestions by stressing the significance of end-user inclusion and piloting options to ensure seamless adoption and user satisfaction. 

Transitioning to implementation strategies, Mr. Furst outlined recommended dos and don’ts, emphasizing thorough vendor diligence and alignment of expectations. This sentiment was echoed by Ms. Silva-Magalhaes, highlighting the inevitability of challenges and the importance of proactive planning to mitigate glitches. 

The session progressed as Ms. Levy introduced an interactive activity, encouraging attendees to break into groups and identify various pain points and best practices for the technology implementation process. Participants discussed several challenges, such as the growing demand for robust resident tech support, the significance of user-friendly interface design, and the crucial role of reliable Wi-Fi infrastructure in supporting technology systems. 

Some of the best practices shared included prioritizing user-friendly design over complex technology, setting micro goals for employees to ensure successful technology implementation, planning for potential failures in design and implementation, conducting weekly meetings to explore sales opportunities and maintain team alignment, and establishing a resident tech committee within communities to enhance implementation efforts and garner support. 

In a rapid-fire conclusion, Abby facilitated a recap of each group’s findings, fostering collaborative problem-solving and knowledge exchange. This segment provided attendees with the opportunity to relate to one another’s professional journeys and depart from the Innovation Lab equipped with actionable insights gleaned from diverse perspectives, thereby enriching the discourse on tech integration in senior living. 

Overall, the Innovation Lab served as a catalyst for exploring innovative solutions and fostering collaboration between tech vendors, capital providers, and senior living operators. It underscored the transformative potential of technology in addressing the unique challenges faced by older adults, paving the way for a future where technology plays a pivotal role in promoting health, wellbeing, and quality of life for older adults. With strategic planning, user-centered design, and proactive implementation, the vision of tech-enhanced senior living can be realized, ushering in a new era of holistic care and improved health outcomes. 

As anticipated, at last week’s meeting of the Federal Reserve Board, rates were held steady at 5.25 to 5.50%. Several months ago, there was hope of a potential move towards rate reductions at this March meeting, but as inflation and unemployment numbers have been higher than projected, the likelihood for rate cuts moved further into 2024.

In his remarks, Chairman Jerome Powell acknowledged that labor conditions remain tight, but that labor-related supply and demand issues are coming more into balance, overall unemployment figures are low, and we are seeing more nominal wage growth compared to recent years. He noted that, while these indicators are positive, the demand for workers is greater than the available supply. Chairman Powell also noted that, while inflation has come down, current levels remain above the 2% goal. Projections are for continued drops in the inflation rate throughout 2024 and into 2025 and 2026.  

With acknowledgement that the Fed believes the current policy rate is at its peak for this tightening cycle, the primary questions now revert to the timing of the first rate cut as well as how many reductions are anticipated to follow for the remainder of 2024. The Federal Open Market Committee (FOMC) member projections for 2024 rate cuts reveal that 15 out of 19 anticipate that the Federal Funds Rate will fall below 5% by the end of the year, coming in at 4.6%. If the Federal Reserve feels that inflationary pressures and employment figures continue to move in the right direction, even if not in a neat, linear fashion, three rate reductions are anticipated, with the first likely to come in June. 

What Does This Mean for Senior Housing and Care? 

The higher interest rate environment has significantly impacted the senior housing sector related to limited access to capital and higher cost of capital for those who can access it. It is estimated that roughly $18 billion in senior housing loans are maturing in 2024 and 2025. Those loans are maturing in a much higher interest rate environment than when they were issued. Therefore, any rate reductions initiated in 2024 will help to make refinancing more viable. As the capital environment loosens and debt becomes more accessible, this should translate into higher transaction levels and an uptick in development activity. However, it is going to take a few rate reductions before we start to see a meaningful difference in the behaviors of senior housing developers, operators, and capital partners. The industry is also likely to benefit from a positive psychological reaction when rate reductions begin, increasing optimism among those in the field that better times are ahead.  

The next meeting of the Federal Reserve Board is April 30th to May 1st with the June meeting to follow on the 11th and 12th of the month. June 12th is a day whereby other notable events have occurred, such as President Reagan’s speech in Berlin to “tear down this wall” and the day when a young girl named Anne Frank received a diary for her 13th birthday. A 2024 Fed Rate reduction on June 12th may not carry similar historical staying power, but it would sure be welcomed by many. As we sit here today, all eyes are on June.