Lee Delaveris, left, vice president, seniors housing & healthcare, KeyBank Real Estate Capital, and Joseph P. Mulligan, managing director of Cain Brothers

MISHAWAKA, IN—As baby boomers age, healthcare and housing are becoming critical needs, but the costs continue to soar out of reach of many retirees. A cost-of-care study by Genworth Insurance puts the annual cost of an assisted living facility around $48,000, but Census figures suggest that as much as 10 percent of the over-60 population is living below the poverty line.

KeyBank Real Estate Capital and Cain Brothers recently worked together to secure financing for the construction of Hellenic Senior Living of Mishawaka, an affordable assisted living facility in Mishawaka, IN, targeting seniors who earn 60 percent or less of the area median income. As previously reported by GlobeSt.com, the project is designated as an Affordable Assisted Living Facility, or AALF, which are Low Income Housing Tax Credit (LIHTC) properties that receive Medicaid waiver reimbursement payments to pay for the assisted living services provided. Seniors age 62 and older who have an income at or below 60% of St. Joseph County's area median income are eligible for residency.

You can hear the complete audio interview with Lee Delaveris of KeyBank and Joseph P. Mulligan of Cain Brothers in the audio player below. If you do not see an audio player, click here to listen to the interview.

“The LIHTC program has been widely used for traditional affordable housing, even age-restricted senior apartments, says Lee Delaveris, vice president, seniors housing & healthcare, KeyBank Real Estate Capital. “But it's less prevalent although growing, to be used for licensed assisted living facilities that not only provide senior housing, but also care services that are paid through the Medicaid program. So bringing that together is unique, but a growing opportunity in the market. We've certainly seen a lot of these done in Indiana, thanks to a strong Medicaid waiver program in that state, but the development side of this transaction is pretty unique.”

In many markets, seniors are starting to spend a disproportionate share of their income on housing, says Joseph P. Mulligan, managing director of Cain Brothers.

“What's happening is that at all age cohorts, but particularly acute with age 65-plus, people are getting priced out of housing, and as communities are getting gentrified, tear-downs are occurring and multifamily is going up,” he says. Traditional pensions of municipalities and manufacturing companies are under stress and sometimes even facing cutbacks, forcing seniors into difficult and sometimes inappropriate choices for their care, like people who need some assistance with the activities of daily living being forced into a nursing home environment because of Medicaid rules.

“If you need some assistance with that, and you can't afford the six to eight thousand dollars a month for some of these private-paid facilities, and you don't want to be isolated living at home, what happens is, you end up stuck in a nursing home, even though you don't really need to be there,” Mulligan says. “You end up going from wherever you lived to a place that's not clinically appropriate, doesn't allow you to be ambulatory, and to really live the life you could. And it costs the state a ton of money.”

The market is beginning to segment senior housing development in terms of income and affordability, says Delaveris.

“There's been a lot of private-pay assisted living development, a lot of relatively high-end products,” he says. “There's more of a need than this segment of the market can afford.”

Mulligan says the Centers for Medicare and Medicaid Services are beginning to adapt rules to accommodate different kinds of care models.

“They're funding services that are intended to augment non-traditional health care,” he says. “They're funding things that help people live in shelters, transportation, food, things of that nature. There's a lot of people that can reside in that in-between zone, where they don't need health care, but they do need services.”

Financing for new models of affordable senior care can include using real estate assets for new uses, says Delaveris.

“We've got some other projects in the pipeline that that are taking that approach of reusing existing real estate and repurposing it to affordable senior living,” he says. “There's bringing services into lower acuity settings, like age restricted apartments, using other funding streams for those services.”

LIHTC options are just one option for assisted living properties, Delaveris says.

“These are relatively 'few and far between' projects in the grand scheme of the senior housing development landscape,” he says. “So bringing more funding routes, bringing more debt financing options through the agency programs, HUD and the bond market, whatever we can do to leverage our platform is a growth opportunity for us, and we think for the space, as more of these projects come to fruition.”

Instant Insights /

AUDIO: Cain Brothers and KeyBank, Recognizing a Need, Financing Affordable Long-Term Care Facilities

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