NIC Notes Uptick in Seniors Housing

For its 14th annual conference, NIC chose the Downtown Marriott, breaking its habit of holding the show in Washington, DC, near its headquarters Annapolis, MD. "This year, attendance is about 1,400," Robert G. Kramer, president of NIC, tells GlobeSt.com. "That¹s the most it has been since a peak in 1998. The market was different then, of course. If you could put two words together, you could develop something. It will never be that way again, but I think there's more rational interest in the seniors housing market now than in recent years."

"We are seeing more and more banks, especially regional ones and smaller ones, enter or re-enter seniors housing and long-term care," says Anthony J. Mullen, NIC research director. "[And] we're also seeing REITs and more institutional investors getting involved."

One of the conference's broader panel discussions, "The State of the Industry: A Snapshot," moderated by Thilo D. Best, president and chief executive officer of Horizon Bay Senior Communities, filled a large room with attendees. Each of the three panelists represented major segments of the seniors housing market: skilled care centers (nursing homes), assisted living centers and independent living.

Paul J. Diaz, president and chief executive officer of Kindred Healthcare Inc., a hospital and nursing home operator with annual revenues in excess of $3 billion, notes chronic health conditions, such as diabetes, obesity and smoking are increasing. Dan Madsen, president and chief executive officer of Leisure Care LLC, which manages over 35 retirement communities, says the leading edge of baby boomers would demand more from their residences than previous generations, shaking up the industry. Pat Mulloy, president and chief executive officer of LifeTrust America, an operator of 59 seniors housing facilities, says the industry has been "through a hurricane, and is recovering, but still has a long way to go."

Best asked the panel what challenges, from a real estate perspective, lie ahead for each segment of the seniors housing market. Madsen answered the question with a question: "Who is the population we're going to serve?" he asked. "The industry has to understand this, because in 15 or 20 years, the seniors housing population isn't going to be the same as it was, or even as it is now. People are used to having greater choices, and are going to demand that in the future. I envision a day when you walk into an independent living facility, and there's a Starbuck's bistro in the lobby and other hotel-like services."

Mulloy agreed that assisted living wouldn't be the same in a few years, and that operators better get used to the idea. "There's not a ton of new development yet, but when it happens, some of the living space will need to be a bit larger," though he added that the demand for studio-sized assisted living dwellings would also remain strong.

By contrast, Diaz notes the real estate challenge in the skilled care side of the business is aging facilities. "The average age of nursing homes is about 25 years, and that's not what the customer wants," he says. "It has to change, and the industry has to invest in retrofitting and renovating when necessary to get away from things like four-bed rooms, and create a more friendly environment."