Senior Living News Wire

New construction is a risky proposition these days. Initial design and the costs of construction are some of the most critical factors when developing a new home even though the long-term use of the house is unquestioned. Is it right to rip up the foundation of a new home because of questions about how to pay for it? If so, that’s what the Republican-controlled House of Representatives did when it voted to repeal the CLASS Act.

The CLASS Act (Community Living Assistance Services and Supports), a voluntary long-term care insurance program, was designed to meet the needs of seniors, caregivers and families to provide long-term care insurance and supportive services.  The CLASS Act was created as part of the Obama Administration’s healthcare reforms under the Affordable Care Act.

The need for long-term care insurance continues to grow as the American population ages regardless of socio-economic background. The CLASS Act was implemented as part of a wide-ranging solution to combat the rising costs associated with Medicare and Medicaid—a fundamental problem facing the country’s fiscal future. While the program was not designed to be the silver bullet to the problems facing Medicare and Medicaid, it was designed as a risk mitigant to the rising costs of care that would ultimately be borne by the taxpayer.

Government Intervention Needed for Greater Accessibility

While there are private sector alternatives for long-term care insurance, can these products reach the thousands of Americans who need it?  Can private-sector participants keep costs under control, all while being accessible to the average American?  
The need for long-term care insurance in the coming years will mimic the need for the government to provide a means for affordable homeownership for individuals and families. Homeownership has been a cornerstone of the American dream, and affordable long-term care may supplement that as part of the dream.

Before criticizing the government’s role in the current housing crisis, look back over the last 78 years that the government has played in managing risk (insurance) for home purchases. The Department of Housing and Urban Development’s (HUD) Federal Housing Authority (established in 1934) provides mortgage insurance to many lenders throughout the country as a means to provide protection against loan defaults. Over the years, the FHA loan programs have provided many homeowners with the an opportunity to own their homes with a low down payment and interest rate while providing lenders protection to encourage taking risks to lend these funds out.

For the first time in its history, the FHA may exhaust its reserves in the coming fiscal year according to the budget figures released by the Obama Administration. In an effort to combat the funding and solvency concerns of the insurance fund, FHA has raised premiums and fees associated with the origination of their loan products.These changes in funding mechanisms allow the program to continue ahead and serve the underlying mission of HUD and FHA despite the possible need for infusion from the Treasury department. The birth of FHA was during the Great Depression that provided a basis from which to promote homeownership.

Has the FHA had a spotless past? Absolutely not, but it has stood the test of time and provided a meaningful product that has enabled thousands (if not millions) to enjoy part of the American dream.  Even as the housing market has showed that there are substantial risks to keeping the FHA insurance fund solvent, are there cries to abolish the laws that established the program?  There has been no vocal cry to repeal the National Housing Act of 1934.  Are all aspects of the National Housing Act of 1934 relevant today?  No, but the legislation has evolved to provide the basis for the success of the program over the years and mechanisms are in place provide for the safekeeping of the insurance fund’s solvency over time.

Should CLASS be Back in Session?

Although there are defects within the CLASS Act, repealing the program represents a premature retreat from a crucial fight. Proceeding to implement—with an eye on modifications and amendments—is the most prudent course to provide an opportunity for affordable, attainable long-term care insurance.

No program is perfect, especially ones devised by the federal government.  Dismantling the foundation and building blocks of the CLASS Act will do more harm than good, which will require starting from scratch.  Many providers and advocacy groups have provided recommendations that will modify the program and address the concerns over the affordability of premiums, funding mechanisms for long-term security and ways to protect tax payers from costs spiraling out of control.  There is no doubt there are flaws in the fiscal sustainability of the Act as it stands today but to simply “give up” is almost un-American.

Could the fundamentals of CLASS be re-worked to make it a program that starts small and grows with time in a fiscally responsible manner?  Even if the program is re-worked but less accessible to the broad populus, it would still be better than nothing.  Could it morph into an insurance type “wrapper” tied to long-term care insurance products like FHA insurance with private lenders?

Even though the House voted to put the CLASS Act down, we should consider the alternative of no program for long-term care that is affordable and accessible to all Americans. If FHA was a byproduct of the Great Depression, maybe the Great Recession will highlight the need for the government to play a role in maintaining affordable long-term care insurance.

Let’s hope that the CLASS Act can withstand the partisan politics to initially survive and then become the program that was hoped for at the outset. While the expectations may initially shrink from the grand vision of new construction, a smaller, more efficient house that can work within the original foundation can sometimes be the right solution.

Written by George Yedinak

Health Care REIT, Inc.’s recent RIDEA-structure partnership with a Canadian REIT for a 42-property portfolio makes sense, says the U.S. company, considering extremely favorable market demographics of a large senior population and a growing demand for senior housing.

“We have spent some time over the last year or so looking at different marketplaces and Canada we thought was unique in the sense that their growth of the elderly population as a percent even exceeds the U.S,” said chief acquisitions officer Stephanie Anderson during Health Care REIT’s earnings call. “They’ve had less of a hit to their economy by the housing there. So even though there was some overbuilding, specifically in the seniors housing market, it did not impact their economy and so the stability of that economy was an advantage.”

Bridging the Acuity Gap

In general, while the Canadian marketplace is very similar to the one in the U.S., it has a significantly lower acuity, Anderson said.

“The difference in Canada is that they have specialized health care once you reach a certain age and acuity level,” she said. “That causes there to be less acuity in this portfolio.”

Some recent “changes on the regulatory side” in terms of licensing requirements means the government has moved the acuity levels up to be able to qualify for socialized housing.

However, there’s a gap between a resident who qualifies for a government-supported long-term care home (which Brinker said is roughly equivalent to the U.S.’s assisted living), and the resident that’s able to remain at home.

“The gap in acuity is expanding, and we do believe there’s a lot of opportunity there to provide those services,” said Brinker.

“That creates additional private pay opportunities, which, over the next five to ten years, we think will be an advantage,” Anderson said.

The properties, which are all independent living, private pay facilities, have the ability to provide services, according to the REIT.

“This is all private pay, but certainly activities of daily living is something that can be provided,” said Brinker. “Chartwell, over time, may decide that the best approach in this specific building is to add more healthcare services; they have that kind of ability and capability.” But for now, he added, it’s a very low acuity portfolio.

Portfolio Potential

The properties are currently 88% occupied, and Health Care REIT has stated its intentions to capitalize on possible upside.

“We have not only occupancy upside, but we have some staffing costs and other ways that we can improve everybody’s return,” Anderson said. “We think Chartwell is really a fine operator. They operate very much like our top operators do in the United States.”

The average occupancy rate in the U.S. across seniors housing is 88.2%, according to the National Investment Center for the Seniors Housing & Care Industry (NIC), so the new acquisition is on-par with the U.S. market. However, there are some buildings in particular that Health Care REIT has targeted for significant improvement.

“There are three or four fill-up buildings that are less than two or three years old that still have census in the 70% to 80% range that we think over the next three years will improve to the 90-plus percent range,” said Scott Brinker, executive vice president and chief financial officer, during the call. He also added that some Canadian markets, similar to some the U.S., had a period of overbuilding in the last five years that is now “starting to burn its way through.”

“Industry wide, in Canada, the census is down 300 or 400 basis points from three of four years ago, and we’re finally starting to see that move back in the correct direction,” Brinker continued. “So at least long-term, we think low 90s, 91%, 92% is highly achievable; that’s what Chartwell had done historically. And this portfolio, the 88%, we think there really is some 400 basis points of growth over the next three or four years.”

Health Care REIT is looking at the venture with Chartwell as a long-term partnership.

“We would like to grow in Canada alongside with Chartwell,” she said.

Written by Alyssa Gerace

It used to be that residents requiring different levels of care could still dine together in continuing care retirement community (CCRC) Harbor’s Edge’s River Terrace dining room.

Whether residents occupied the community’s independent living units, assisted living apartments, or skilled nursing units, they could all join each other at the dinner table—until last spring, when the community’s managers began separating the healthy from the frail, writes the New York Times’ “The New Old Age” blog.

“[L]ast spring, managers declared the River Terrace and two other dining facilities at the community off limits to anyone but independent living residents. Assisted living residents were told to use their own small dining room; nursing residents were restricted to theirs.

Family members were instructed to join them there. But longtime friends—and several married couples—who lived in separate parts of the facility could no longer share meals in the main dining room. Those in assisted living or nursing care also were also barred from community events like the Fourth of July celebration.

[T]he new policy initially stemmed from overcrowding, said Neil Volder, a former real estate developer who built the complex and is its executive director.

Moreover, managers believed that the policy of letting residents of various degrees of disability dine together violated Virginia state regulations, Mr. Volder said, and left Harbor’s Edge vulnerable to lawsuits or revoked licenses.”

It wasn’t long before residents began fighting what they considered discrimination and trying to reverse the new rules, says the Times, although some residents agreed with the policy.

The community ultimately offered up a compromise, saying that those who originally entered independent living but had since transitioned to assisted living could undergo an assessment to determine whether or not they would be allowed to continue using the dining room.

Read the full “Tables Reserved for the Healthiest” article here.

Written by Alyssa Gerace

CNL Healthcare Trust, Inc., said on Feb. 20 that it made its first acquisition (originally announced in December), a five-property portfolio of senior housing communities purchased for approximately $84 million.

CNL is a real estate investment offering that recently changed its name from CNL Properties Trust to reflect its focus on healthcare assets. The portfolio was acquired from affiliates of Primrose Retirement Communities.

“We are thrilled to complete our first acquisition with Primrose, which has a successful track record of developing and operating high quality senior housing communities,” said Stephen H. Mauldin, president and chief operating officer of CNL Healthcare Trust, in a statement. “We believe senior housing and other healthcare assets provide an excellent opportunity for our investors as the aging population and rising healthcare costs are expected to continue to drive demand for well-positioned and well-managed real estate assets.”

The purchased communities include Casper Senior Living, in Casper, Wyo.; Grand Island Senior Living in Grand Island, Neb.; Sweetwater Senior Living in Billings, Mont.; Marion Senior Living in Marion, Ohio; and Mansfield Senior Living in Mansfield, Ohio.

The communities, which were 95% occupied as of Feb. 12, will still be operated by Primrose under a long-term triple net lease.

Written by Alyssa Gerace

Real estate brokerage Grubb & Ellis Co. recently filed for bankruptcy, reports the LA Times, and will sell its assets to the parent company of its rival, Newmark Knight Frank, as part of a prepackaged bankruptcy, according to the firms.

BGC Partners Inc., a New York financial services firm that acquired Newmark Knight Frank in October, agreed to buy essentially all the assets of Grubb & Ellis for an undisclosed price.

Grubb & Ellis will conduct its asset sale under Section 363 of the U.S. Bankruptcy Code and has commenced Chapter 11 proceedings in the U.S. Bankruptcy Court for the Southern District of New York.

The firms did not reveal whether the Grubb & Ellis name would survive the takeover. The company’s yellow-and-black signs are a common sight on offices, warehouses and other commercial buildings available for sale or lease.

Grubb & Ellis was formed in Oakland in 1958 by Bill Grubb and Hal Ellis and grew into what was once the largest independently owned, publicly traded real estate firm in the United States. It borrowed heavily to expand, however, and had trouble turning a profit after the real estate industry crashed in the early 1990s.

The brokerage was dropped as a sponsor for Grubb & Ellis Healthcare REIT II, Inc. last November, which is now sponsored by American Healthcare Investors, LLC and Griffin Capital Corporation, and known as Griffin-American Healthcare REIT II.

Following this, Grubb & Ellis’ share prices fell below $1, and it was delisted by the New York Stock Exchange in January.

Read the LA Times article here.

Written by Alyssa Gerace