As operators adjust their portfolios in 2023 for margin, the range of units is one of the most important considerations.
New data from the National Investment Center for Housing and Care for the Elderly (NIC) has shown that properly sizing care segments is one of the most important factors in designing a residential community for the elderly, and it can have a huge impact on inquiries and occupancy. trends.
Arrow Senior Living CEO Stephanie Harris has long believed that balancing the number of independent residents with other levels of care can improve margins in the seniors community as a whole. Using this approach, the company can also offer more affordable prices in certain units of measure.
Looking ahead, she believes that the ever-increasing nature of working with the elderly will encourage more operators to explore and fine-tune combinations of units.
“I think the days of offline memory care and the days of offline assisted living need to be revisited,” Harris said. “Perhaps they are over.
Set of units for margin
In 2023, many operators across the country have set monthly rates higher, sometimes more than in any previous year. The amount the operator can change depends on the size of the apartment, according to data compiled and analyzed by the National Housing and Care Investment Center (NIC).
According to NIC data, memory care unit care saw the highest year-on-year growth in asking price, from 6.5% for one-bedroom units to 11.7% for two-bedroom units in Q4 2022, according to NIC data. This is compared to an increase in living assistance, which ranged from 5.3% for one-bedroom apartments to 7.3%.
“In the independent living segments, you will see that the bigger the rate increase, the greater the increase in demand and occupancy,” NIC Deputy Director Omar Zaraoui told Senior Housing News. “But in the case of body care and memory care, the more the segment is based on needs, the smaller the increase in the rate, the greater the increase in demand and the recovery in occupancy.”
Communities with larger independent housing units tend to have higher occupancy rates, according to Zahrawi’s research. On the other hand, AL and memory care communities with smaller divisions tend to have relatively higher employment rates.
St. Louis-based Arrow Senior Living has a portfolio of 29 medium-sized communities, and Harris believes adjusting some of the details could make a big difference to the company’s bottom line. The unit mix is one such detail.
In the past, Arrow has relied on communities with many independent housing units to help increase profits while keeping residents’ rates for certain units in the mid-market range.
Arrow has been honing its unit pooling model for nearly a decade, after transforming the independent living community into an IL, AL community, and caring about memory. Now, 18 communities later, this model is still the blueprint for Arrow.
By fine-tuning the number of units in a community, operators can also plan for future demand. For example, while Priority Life Care, based in Fort Wayne, Indiana, places more emphasis on a higher level of care continuum, company leaders believe that offering a full care continuum makes it easier to move in.
If someone voluntarily chooses to live independently, that person is also likely more open to the next phase of assisted living and memory care, Priority Life Care co-founder and COO Bobby Petras told Senior Housing News.
“If we had a community of 100 units, we would like at least 20 of them to be dedicated to memory care or what we consider to be advanced personal care,” Petras told SHN. “For some of our communities of about 150 units, we have about 40 either for memory care or higher acuity living.”
While Priority Life Care has independent living options, “they’re more about getting people in knowing they might need more services than they planned,” Petras said.
“[IL] more for marketing for living assistance and memory care because residents are going to move to that level,” he added.
Harris noted that in some cases, by the time a potential resident enters the life of the elderly, they are actually further along the care continuum than originally thought.
“Most people looking for senior housing think they need an independent life, they can still choose the level of care for the elderly – there is always confusion around this,” she said.
Correct mix selection
The range of units depends on many factors, from market dynamics to the demographics of residents. The correct ratio of units can help determine the difference between relative success and failure.
According to co-founder and president Alex Pichon, Bridgewood Property, a developer and operator of luxury senior housing, has a portfolio of 36 communities across the Southeast and Midwest, with a unit profile of approximately 50% IL, 40% AL, and the remaining part is for memory care. .
For Bridgewood, he said, a higher independent residence usually means higher margins. But Pichon thinks other types of units can also play an important role.
“Historically, we’ve made most of IL’s products, and all of our recent builds range from 50% to 100% independent living,” Pichon told Senior Housing News. “But the addition of assisted living and/or memory care can also serve as a convenience to both existing residents and residents whose needs may exceed what a typical independent living environment can satisfy.”
Sometimes some units have great synergy. For example, in the PLC portfolio there are seven villages that offer individual independent cottages for living. In these communities, nearly three-quarters of residents end up moving into nursing homes.
“The cottages are always full,” said Petras. “People are fighting to get into them,” he said.
He added, “The flip side is that no one wants to see the next phase of care, whether it’s going from IL to AL or from AL to memory care.”
Priority Life Care’s total portfolio includes more than 3,500 units, of which approximately 3,000 are for assisted living, 471 for memory care, and a total of 110 for independent living.
Priority Life Care has also created a transitional layer of care between assisted living and memory care, which has helped keep demand high for AL and memory care, Petras said. Extended Personal Care is for older adults with memory or cognitive care needs that may exceed what a life with care can provide, but who also have not received a diagnosis of Alzheimer’s or dementia.
“Our higher margin is no doubt due to memory concerns,” Petras said.
He added that depending on the location, the PLC memory service can generate a monthly rate of $6,000 for $7,000 per room, which is near average market rates in relation to the type of product. He said. For the elderly, the operator sets monthly rates at around $4,200 on average.
For its independent residential units, PLC reports rates in the general range of $1,700 per month. But not only are the stakes higher as visual acuity increases, so are the margins.
“For a memory care district that has about 15 units, we see margins ranging from 45% to 50%,” Petras said.
The Arrow likes to have twice the presence in the community of assisted living or memory care. This creates a pool of feeders for transfers to more active entries in the future. This is the strategy that Arrow has used to achieve success in recent years and the company is likely to stick with it from now on.
“We are addressing affordability through a combination of units and having independent residents to be transferred…combined with technology to improve their outcomes and the length of their stay so they can stay longer at each level of care,” Harris said.