by Kevan McCormack

Senior Living continues to be one of the hottest real estate “asset classes”.  Within the broad Senior Living classification, the industry is further divided into three types: Independent Living, Assisted Living, and Memory Care.  Independent Living is for residents who are more or less self-sufficient and able to live on their own with little to no daily assistance.  Assisted Living tends to cater to residents who need some level of daily assistance and may have limited ambulation. For example, they may need help dressing, preparing meals, or taking medication.  Memory Care, of course, is a higher level of Assisted Living. They cater to residents who have some form of dementia and require considerable daily assistance. The residents cannot thrive in an uncontrolled environment.

senior real estate market

Continuing Care Retirement Communities(CCRC), for decades, have been mixing these uses into campus-like settings where Independent Living buildings— resembling an apartment complex—cover a majority of the campus and Assisted Living and Memory Care facilities are centrally located.  Today, however, many senior living facilities are being built by more specialized developers due to many factors, some related to the capital markets.  During the recession, Independent Living was difficult to finance due to the “choice” nature of the business. This means that the decision to move was not necessarily “needs-based” and it was difficult to sell a home, so many developers stayed away from those opportunities.  In the same manner, CCRCs, which were not typically “for rent” but “for sale” models, were next to impossible to finance as the industry shifted away from the “for sale” CCRC model.  However, needs-based Assisted Living was in a nationwide shortage and developers were happy to focus their energies on solving that problem.

Today, innovative Senior Living owners and operators are working on ways to differentiate their projects while increasing revenue.  Often the key is to implement strategies that maximize the average length of stay for each resident.  An Assisted-Living facility may have an average length of stay between 20 and 24 months.  But, operators are trying to attract tenants before they need the full services of Assisted Living through what some are calling an “Enhanced Living” model.

Enhanced Living blends the lines between typical Independent Living and Assisted Living by offering residents comfortable, apartment-style rooms with the ability to retain a higher level of assistance as their needs dictate over time.  This also provides a nice and flexible setting for elderly couples where they each have differing physical assistance needs.  The benefits are huge for the resident and their families.  Moving is an often understated negative in the whole aging process, but it takes a physical and mental toll on the elderly resident while also causing disruption in the lives of his or her family members.  With Enhanced Living co-located with Assisted Living and Memory Care, families are afforded the opportunity to plan ahead and be more proactive rather than reactive when they are planning living arrangements for their parents.  When a typical Assisted Living facility is designed in such a way to provide for this extra gradient of care called Enhanced Living, the owners and operators are realizing a long-term economic benefit with a more stable residency while providing an “age in place” community in a similar manner to CCRCs.

When developing your next Senior Living facility, it is helpful to have a finance partner that is well-versed and educated in the operations.  Metropolitan Capital Advisors has been financing Senior Living facilities for over a decade, understands the business and has a dedicated team that focuses on Senior Living and healthcare real estate transactions.  For further information on how Metropolitan Capital Advisors can help you finance your Senior Living or healthcare projects, contact kmccormack@metcapital.com.