Looking at the numbers alone, the investment potential forseniors housing product is compelling--the US Census Bureau expectsthose over age 65 to increase in number from 35 million in 2000 tomore than 86.7 million by 2050. The population of those over 86.7will nearly quintuple to 20.9 million over that same period.

According to Gorman, "One of the most salient threats totraditional senior housing product is the increasing preferenceamong seniors to age in place." As such, there has been a shifttoward in-place care in both the private and public sectors, thelatter being federally financed with such programs as Medicaid andthe Program for All-Inclusive Care for the Elderly (PACE). The riseof such options as continuing care retirement communities,traditional retirement communities and inner-city home healthservices, as well as state programs including HCBS waivers and HUDaffordable assisted living grants, as also added pressure on theinstitutionalized senior living space.These factors, along with thebelief that seniors should live independently as long as possible,poses a challenge to developing mixed independent and assistedliving facilities, since seniors in independent living "wouldprefer not to see closely located assisted living facilities astheir next step."

Seniors with resources, spouses or adult children generally havethe means to defer entry in assisted living and skilled nursingproperties as long as possible. "Among these groups, independentliving facilities would be the more popular choice and brings withit the advantage of having a low variable component of NOI andindependence from state or federal reimbursements, which aresubject to rulings and interpretations," says Gorman. She adds thatnot only are such facilities least complicated to design and buildand require low maintenance since they don't go through as muchwear-and-tear, but they also have lower operating costs since theresidents, for the most part, are healthy and active and don't needextensive care. Most of the revenues for such product come frommonthly leases, and earnings can be upped through the addition ofamenities.