The Next Big Challenge:

Transcription

1 The Next Big Challenge: Serving the Middle Income Senior Housing Market PRESENTED BY:

2 Introductions Dana Wollschlager, Principal Jamie Timoteo, Vice President Rick Banas, VP of Development & Positioning x240 2

3 Learning Objectives DEFINE the Challenge REVIEW the Facts OFFER Alternatives and Options 3

4 Poll Question How would you define the older adult middle income market? a. Earning less than $25k b. Earning between $25k and $35k c. Earning between $35k and $50k d. Earning between $50k and $75k e. Earning more than $75k 4

5 The Cost of Senior Living 5

6 Annual Expenditure Average IL rent for US is $2,971 and $2,614 for the Midwest Average AL rent for US is $4,365 and $4,275 for the Midwest Assumes independent living residents spend 60% of their income on housing and assisted living residents spend 85% of their income on housing. Annual Expenditure $59,420 $61,624 $60,353 $52,280 INDPENDENT LIVING ASSISTED LIVING All MSA's Midwest Source: National Investment Center for Seniors Housing & Care 6

7 Affordability Continuum 2016 Area Median Income (AMI) Columbus, Ohio: 30% of AMI 50% of AMI 60% of AMI 80% of AMI 100% of AMI Household Size Extremely low Very low LIHTC max Low Median 1 Person $ 14,650 $ 24,400 $ 29,280 $ 39,000 $ 48,750 2 Person $ 16,750 $ 27,850 $ 33,420 $ 44,600 $ 55,750 Source: FY 2016 State Income Limits, HUD.gov Affordable Moderate Market Rate HUD or Public Housing w/ PBS Housing Choice Voucher Low Income Housing Tax Credits Market Rate w/ Medicaid Waiver Market Rate Private Pay 7

8 Older Adult Characteristics 88% of senior households strongly agree that they would like to stay in their CURRENT RESIDENCE as long as possible. 1 The typical resident is an 87 year old woman with assistance needed for 2-3 activities of daily living (ADLs). Additionally, they have 2-3 of the top 10 chronic conditions. 2 54% of residents are 85+ years old. 27% are between years old 1 89% of senior households strongly agree they would like to remain in their COMMUNITY as long as possible. 1 Independent living residents spend up to 70% of their time in their apartment. 1 Source: (1) Bipartisan Policy Center Healthy Aging Begins At Home (2) National Center for Assisted Living 8

9 Older Adults Spending Habits Other Entertainment Apparel Houshold Budget Breakdown 17.4% 17.8% 16.6% 5.1% 5.6% 4.4% 2.6% 2.9% 2.2% Table shows the 7 most common expenses for all seniors The only two that increase as seniors age are health care costs and housing Transportation Out-of-Pocket Health Care 14.0% 13.2% 14.4% 11.9% 13.4% 15.2% Previous slide demonstrated the equity gap expected for seniors over the next 40 years. Food 12.3% 12.5% 12.1% Housing 35.4% 34.9% 36.1% Source: Social Security Administration, Expenditures of Aged Chartbook,

10 The 85+ population is projected to triple from 6 million to 14.6 million in % Income Levels Income Levels of Age 85+ Household 64% 66% 63% 31% 31% 29% 29% Source: Nielsen Senior Life Report MIDWEST MIDWEST USA USA Age 85+ <$35k Age 85+ between $25k & $50k 2016 Area Median Income (AMI) Columbus, Ohio: 30% of AMI 50% of AMI 60% of AMI 80% of AMI 100% of AMI Household Size Extremely low Very low LIHTC max Low Median 1 Person $ 14,650 $ 24,400 $ 29,280 $ 39,000 $ 48,750 2 Person $ 16,750 $ 27,850 $ 33,420 $ 44,600 $ 55,750 Source: FY 2016 State Income Limits, HUD.gov 10

11 Current Lack of Retirement Assets The Urban Institute developed projections for the BPC Commission on Retirement Security and Personal Savings that paint a troubling picture of retirement security, especially for those in the bottom half of the distribution of retirement assets. Median per capita retirement and financial assets was around $105,000 in Median per capita retirement assets for those in the 25th percentile lack any retirement assets. Individuals in the 75th percentile of retirement assets have around $338,000 in retirement and financial savings. 29% of households aged 55 and older have neither assets in a retirement account nor a defined benefit pension. Over the next 20 years, nearly 40% of individuals over the age of 62 are projected to have financial assets of $25,000 or less» 20% of those over 62 will have $5,000 or less. 11

12 Future Lack of Retirement Assets Table demonstrates the rapid growth in retirement savings and home equity for the 62+ homeowner within the top quintile The bottom through the 4th quintile remain relatively flat over the next 40 years. 12

13 Recent Boomer Financial Trends Looking longer term into the future we find the following stats have changed over the same time when the economy has had a steady rise in home prices and the stock market (Time April 2016):» 59% say Social Security will be major source of retirement income. Up from 42% five years ago» 46% say leaving money to heirs is important. Down from 63% five years ago.» 24% feel confident they will have enough in retirement. Down from 37% five years ago. Average Boomer goal is to have $45,500 a year in retirement income. Avg. retirement portfolio has $136,200 in it which is approximately $9,129 per year or a $37k shortfall (BlackRock) 13

14 Middle Income Older Adult Take-Aways The middle income market is older adults that earn between $30k - $50k per year Across the US 29% of older adult over 85 earn between $25k and $50k» Number of older adults over 85 is expected to triple to 14.6 million by 2040 The average median retirement savings is $105,000 The gap in retirement savings between the top earners and the rest of the population is expected to increase significantly over the next 40 years Baby Boomers confidence for adequate retirement savings have been diminishing over the last 5 years 14

15 The Next Big Challenge Are linen table cloths and fresh flowers at dinner worth $900 more per month? 15

16 Affordable Assisted Living Communities Today INNER CITY CHICAGO» 110 Assisted Living Apartments» 100% Medicaid-Waiver CHICAGO SUBURBS» 150 Assisted Living Apartments / 62 Memory Care Apartments» Assisted Living: 30% Private Pay / 70% Medicaid» Memory Care: 48% Private Pay / 52% Medicaid MID-SIZE METRO AREA» 99 Assisted Living Apartments» 50%+ Private Pay RURAL AREA» 41 Apartments» 37% Private Pay 16

17 Gardant Management Average Rents 2015 Revenue per Month per Occupied Apartment Affordable Assisted Living Communities Managed by Gardant Management Solutions Range Average City of Chicago, Cook, Kane, Lake, McHenry Counties $3,025 to $3,482 $3,240 Grundy, Kankakee, Kendall, and Will Counties $3,152 to $3,404 $3,275 Northwest Illinois $3,081 to $3,355 $3,193 Central Illinois $2,938 to $3,347 $3,144 St. Louis Metro East $2,913 to $3,047 $2,976 Southern Illinois $2,715 to $2,879 $2,783 Includes all revenue from Room, Board and Services, including personal assistance and help with medications. Sample Income Limit: Rockford, Illinois: $28,440 17

18 Length of Stay Analysis Monthly Rent Annual Rent % Spent on Housing Annual Exp. Annual Income Shortfall Median Retirement Savings Avg. LOS $ 3,300 $ 39, % $ 46,600 $ 30,000 $16,600 $ 105, Years $ 4,275 $ 51, % $ 60,400 $ 30,000 $30,400 $ 105, Years $ 3,300 $ 39, % $ 49,500 $ 30,000 $19,500 $ 105, Years $ 4,275 $ 51, % $ 64,100 $ 30,000 $34,100 $ 105, Years Less than $1,000 a month can mean more than two more years in a senior living facility. 18

19 Exteriors 19

20 Interior: Community Areas 20

21 Interior: Apartments 21

22 Affordable Assisted Living Communities Tomorrow VARIETY OF OPTIONS:» Private Pay Value Conscious Upper Income» Private Pay Middle Income - $30,000 to $50,000» Mix of Private Pay and Medicaid Waiver» Medicaid Waiver used to: Boost occupancy rates Fill hard-to-sell apartments Provide safety net 22

23 Value Driven Affordable Assisted Living Communities Tomorrow Emphasis on Meeting Needs vs. Wants 23

24 Financing Affordable Assisted Living Conventional HUD Tax Credits REITS EB5 Housing Authorities USDA HOME Loan Funds Bonds Fannie Mae Grants FHA Loan 24

25 Medicaid Waiver Challenges Capacity Reimbursement Rates Approval Process Community and Residents Payment Cycle Rate Adjustments Centers for Medicare and Medicaid Managed Care 25

26 Key Affordable Assisted Living Considerations Architectural Design Number of Apartments Type and Size of Apartments Community Areas Services and Amenities Development and Operating Costs Occupancy Pricing 26

27 MARKET ANALYSIS What Opportunities Might be Available» Demographics» Socioeconomics» Competition Options Already Available» Pricing FINANCIAL ANALYSIS» Development» Operating Getting Started 27

28 Project Planning Define the budget/gmp before any planning reverse engineer design into financial feasibility. Programming precedes much of the architectural work. Get the full project team on early value engineering from the beginning. Expenses become engineered into the footprints. Understanding the need for balance of service rich vs. pure rental. Define the balance between consumer needs vs. consumer wants strive to create VALUE. Flexibility and convertibility in design and functionality. 28

29 Understanding Operational Costs Fluid Pro forma Financial sensitivities Understand local and regional labor markets Design to highest operational efficiencies Benchmarking costs against similar product lines Disciplined design approach: Revenue vs. Nonrevenue producing spaces Holding to staff ratios: To residents To square footage 29

30 Design Development Be creative but smart in the building system design. Establish GMP early in the documentation process and be disciplined. Work closely with the team to condense schedule (early certificate of occupancy). Marketing management successful fill rate. Design for long-term operational expense value. 30

31 Thank You Dana Wollschlager, Principal Patrick McCormick Dana Wollschlager Rick Banas, VP of Development & Positioning x240 Laura Hester Jamie Timoteo, Vice President