NEW YORK CITY—Earlier this month, executives with healthcare REIT Welltower Inc. joined with Miss USA Olivia Jordan and the Alzheimer's Association to ring the opening bell at the New York Stock Exchange and to illuminate the Empire State Building in purple light to help raise awareness of Alzheimer's disease. That same day, Thomas DeRosa, CEO of the Toledo, OH-based REIT, was named national honoree at the association's annual Brain Ball in Washington, DC.

For DeRosa, Alzheimer's has had a personal impact: his father died from complications of the disease. It's also a focal point for what he sees as a transformation of the healthcare/real estate continuum. Earlier this spring, for example, Welltower and Hines partnered on what will be a 15-story assisted living facility for the underserved seniors population in Midtown Manhattan. It's not exactly the customary setting for seniors housing, but DeRosa believes we should expect to see more such developments in years to come. GlobeSt.com sat down with DeRosa recently to discuss the changing landscape; part one of the conversation appears below.

“When I was asked by the Alzheimer's Association to be their national honoree, it was an opportunity for us as a company to bring awareness, from a broad perspective, to this disease for which there is no cure. Much of our business is devoted to providing progressive residential settings that allow the frail and demented population in the US and UK to live with dignity and quality of life, and to replace an element of living that often disappears as someone retreats into the fortress of their home or apartment as they age. That's wellness, and the first thing I mean by wellness is safety. Traditional home environments were not built for frail, demented 88-year-old men and women.

“Next is nutrition and hydration, followed by mobility. People who live alone and isolated generally move from their bed to a chair to the bathroom—that's their existence. The last piece of it is cognitive engagement. We believe that no matter what stage of cognition you have, there are levels of cognitive engagement that can improve your quality of life. So this was an opportunity to go out and promote the good work of the Alzheimer's Association and to bring awareness of what Welltower and its operating partners provide today. I'm very proud to say that we raised over $3.1 million for the association through this event, and it's continuing to come in.

“There's no cure for Alzheimer's; there's no drug therapy that we're aware of that could address the needs of a broader population today. There are some things happening in laboratories that appear promising, but they're years away. So the best opportunity we have for this population is progressive residential care models, maintaining a wellness-focused lifestyle around them. Wellness, which is what we do, is actually becoming part of healthcare. It has to be embraced as part of healthcare. When I sit down with leaders of the major health systems in this country, whether it's New York Presbyterian or the Cleveland Clinic, there's a recognition that what we do as a real estate company is connected to what they do.

“Sometimes I think the term 'seniors housing' actually belittles what goes on in our buildings. You can think of us as a company with over 1,400 properties, or as a company that houses 150,000 people who range from frail to demented. In the youth culture of our country, this is a population that lives in the shadows. Frankly, we didn't have a big population of these people historically, because generally we died earlier. When President Johnson signed Medicare into law 52 years ago, the idea was that you would start accruing benefits at age 65, because the average life expectancy was 68. Today, if you retire at age 65, your average life expectancy is being pushed out every year. Right now it's around 87, 88. We're living longer because the things that used to kill us no longer kill us. The 20- to 34-year-old population is declining as the 75-and-up population is increasing exponentially. We need to come to terms with the fact that as we age, we have to redefine what 'home' means. It's not the three-bedroom, two-bath split level in the suburbs.

“It's interesting being a REIT that has a higher purpose. The REIT vehicle works very well for a company that is real estate heavy. I often say, 'Think of us a healthcare delivery business that is real estate heavy, as opposed to a real estate company that chooses to invest in healthcare.' That's a governor of how we deploy capital. If you just deploy capital based on cap rate in healthcare and you don't really understand what's happening in healthcare, you will make a mistake and lose money for your shareholders over time. But if you place yourself in a position to say, 'This real estate can actually improve the efficiency of healthcare delivery in a cost-constrained environment,' I feel it's an extraordinary opportunity. This is an extraordinary moment for a real estate company engaged in healthcare. We have so much infrastructure in this country that has to be taken out of service and rethought. A lot acute-care hospitals have to be taken out of service and replaced with state-of-the-art outpatient networks that are connected to other providers of healthcare, whether it be skilled nursing, assisted living or other forms.

“I think that's the future, and the capital that will be needed for this transformative phenomenon is just so large. There are very few traditional owners of commercial real estate that own healthcare real estate; so much of it is owned by acute care systems that are now trying to think about whether they want to own all of this real estate. 'Is all of this real estate worth investing in, or do I want to take it out of service? Do I need new real estate, do I need new buildings?' If you look at major metro markets, it's very expensive to put up a new, outpatient wellness center. But they need to do that, and we want to partner with them on it.”

Next: what the future of healthcare real estate will look like

Instant Insights /

'An Extraordinary Moment' for Healthcare RE

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