Senior Living News Wire

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

The seniors housing sector continues to see recovery, with positive rent growth trends and a slightly higher occupancy in fourth quarter of 2011, although construction activity continued to decline, according to NIC MAP, a data analysis service of the National Investment Center for the Seniors Housing & Care Industry (NIC).

The average occupancy rate for seniors housing properties in the last quarter rose to 88.2%, up 0.1% from the previous quarter, and a 0.7 percentage point increase from a year ago, the data analysis service reports.

For independent living properties, occupancy averaged 88%, 60 basis points beneath the average of 88.6% for assisted living properties. However, the independent living segment was the only one to show improvement from the prior quarter, posting a 0.2 percentage point increase from the third quarter.

Average occupancy for both independent and assisted living are both 1.2% above their respective cyclical lows, says NIC.

“With occupancy continuing to rise, it is clear the recovery is underway, however, independent living has been driving much of the occupancy gains in recent quarters,” Michael Hargrave, vice president of NIC MAP, said in a statement.

Source: NIC MAP

Year-over-year rent growth for seniors housing was boosted 0.1 percentage points to 1.7%, compared to 0.8% in the fourth quarter of 2010.

“While rent growth continues to slowly improve, it is important to note that current rent growth remains below the current level of inflation,” Chuck Harry, NIC’s director of research and analysis, said in a statement.

Annual absorption was at 2.0% in the fourth quarter, compared to 1.9% in the third quarter and 1.7% during the same period of the previous year. This marks the fifth consecutive quarter where annual absorption outpaces the annual inventory growth, which serves to pressure occupancy, Harry noted.

Seniors housing annual inventory growth rate was 1.2%, better than the previous quarter’s 1.0% but down from 1.5% in the 2010′s fourth quarter, NIC reports. Construction as a share of existing inventory for seniors housing was also down, at 1.5% compared to 1.6% in the third quarter.

Nursing care occupancy rate declined slightly to 88.2%, and NIC says that this segment’s occupancy has been “marginally declining” for several years now. Annual inventory posted negative growth of -0.4% in the quarter, “continuing the established trend of slightly declining inventory growth.”

However, private pay rents for the sector grew 3.4% year-over-year in the quarter, NIC says, keeping pace with third quarter results.

Click here to access the regional quarterly NIC MAP data.

Written by Alyssa Gerace

A new group of institutional grade independent living facilities in the Dallas and Fort Worth Texas markets are for sale according to Marcus & Millichap Real Estate Investment Services, who was chosen to sell the properties.

The properties are being offered on an open-bid basis.

“Now is an excellent time for seniors housing investors to add to their portfolios or for new investors to gain a foothold in the sector,” said Doug O’Toole, vice president of investments for Marcus & Millichap. “Nationally, the 65-year-old-plus age group is projected to expand by almost 18 million residents over the next 10 years and account for 17 percent of the U.S. population, up from an estimated 13 percent in 2011.”

The portfolio has more than 400 units and is spread out over two communities according to a statement. The North Dallas facility consists of approximately 232,000 square feet and was built in 2009 on 14.5 acres.

The Fort Worth facility consists of approximately 197,000 square feet and was built in 2007 on 7.4 acres.

Written by John Yedinak

CLW Health Care Services Group recently announced its advisory role to MMA Realty Capital Advisors, Inc. in the $11.35 million sale of Crystal Terrace, an Oregon senior housing community.

Located in Klamath Falls, the 87-unit property was sold to Quail Park of Klamath Falls, LLC, an affiliate of Seattle, Wash.-based Living Care, which owns and operates properties in Oregon, California, and Texas.

Crystal Terrace’s occupancy rate was 94% at closing but fell to 88.5% at beginning of marketing. The community, built in 1995, has 20 independent living cottages, 30 independent living apartments, and 37 assisted living units.

CLW specializes in exclusively representing selers in the sale of senior housing properties and has sold more than $1.4 billion in senior housing assets across the nation.

Written by Alyssa Gerace

Greenfield Senior Living, Inc. announced on Nov. 7 its acquisition of two senior living facilities located in Memphis, Tenn., for a total transaction cost of $5.6 million.

Waverly Gardens, a 168-unit independent living community, was purchased from Waverly Gardens of Memphis LLC. Waverly Glen, a 52-unit assisted living and memory care community, was purchased from Kirby Oaks Integra LLC.

“The newly named, Greenfield Senior Residences at Lenox Park and Greenfield Assisted Living at Lenox Park will provide seniors a continuum of care in a campus-like setting,” stated Mathew Peponis, Chief Executive Officer of Greenfield. “We are excited about our growth plans in Tennessee and the opportunity to impact the lives of seniors throughout the Memphis metropolitan area.”

Occupancy in both locations was approximately 70% at the time of the acquisition. Greenfield is expected to imminently announce renovation plans for the two new communities and outreach opportunities to Memphis’s community of seniors.

Written by Alyssa Gerace

Cerulean Partners announced the acquisition of The Atrium of Belleville, a 76-unit private pay independent senior living community located in Belleville, Il.

The acquisition by Cerulean and its strategic partner, an entity associated with The Inland Real Estate Group of Companies, Inc., is a first for both firms.

Previously owned and operated by Brookdale Senior Living (NYSE:BKD) under the name Grand Court, Cerculean said it plans to invest $1.5 million to improve the property for residents and add value for investors. Based in Chicago, Cerulean is a venture capital backed investment firm focused on acquiring and re-developing underperforming senior housing assets across the country.

“Through our shared expertise and resources, along with those of our operating partner, Arrow Senior Living, we expect to create what will be the premier senior living community in the east metro area of St. Louis and all of southern Illinois,” said Rick Shamberg, principal of Cerulean. ”When you combine the demographics of our country’s population with growing optimism about the economy, there’s no question that this deal will bring value.”

During an interview with SHN, Shamberg said the company is looking to invest an undisclosed amount of money over the next five years.

“Our objective is to build a portfolio of properties that approaches $75 to $100 million,” he said. “This is the first in what we hope will be 10 transactions.”

Terms of the deal were not disclosed.

Written by John Yedinak

Investment advisory brokerage firm ARA, headquartered in Atlanta, recently brokered the $85 million sale of The Carlisle Naples, a 350-unit independent and assisted living community located in Naples, Fla.

The seller, Naples Club, LLC, was represented by ARA’s Seniors Housing specialists Ryan Maconachy and Chad Lavender. The community will now be operated by an affiliate Senior Resource Group under a triple-net lease with a leading healthcare real estate investment trust.

The Naples seniors housing market has extremely high barriers to entry and The Carlisle community has been operating at or near 100% occupancy for the past two years while charging top of the market rental rates.”

The three-story mid-rise community, built in 1998 and upgraded in 2003, has 257 independent living units and 93 assisted living units.

This is the second part of the ARA Seniors marketed two-property Carlisle Portfolio, which totaled 660 units of IL and AL. The first sale, of Carlisle Palm Beach, was completed in April 2011 and sold for $53 million.

Written by Alyssa Gerace

Capital Senior Living Corporation (NYSE:CSU) recently announced a $30 million acquisition of three senior living communities, located in North and South Carolina.

The levels of care offered in the portfolio include independent living, assisted living and memory care. The portfolio was financed with approximately $22 million of 10-year fixed rate debt that is non-recourse to Capital Senior Living, with an interest rate of 4.92%.

The three communities have an average occupancy of 92%, with average monthly rents of approximately $2,900. The acquisition will increase annual revenue by approximately $8 million; additional cash from facility operations is at $1.4 million, or $0.05 per share, with incremental earnings of $0.7 million, or $0.03 per share.

Capital Senior Living is also conducting due diligence on additional transactions consisting of high-quality senior living communities in other locations with existing extensive operations; subject to the completion of due diligence, it expects to acquire these communities late in the fourth quarter of 2011.

“These transactions increase the Company’s ownership of high-quality senior living communities, enhance our operations in geographic concentrations and add to the Company’s growing profitability with incremental earnings and CFFO,” said Lawrence A. Cohen, Chief Executive Officer of the Capital Senior Living, in a statement.  “The exceptional returns generated by this acquisition complement the positive results we are achieving in our operations with increases in occupancy and average monthly rents. These encouraging trends reflect the fundamental strength of our substantially all private-pay business as we benefit from need-driven demand and limited new supply.”

Written by Alyssa Gerace

A senior housing facility in Vermont recently received a a $575,000 grant for an expansion project that will be a “major part” of the drive to get new units built, reports the Brattleboro Reformer.

“It is always a challenge to come up with the funding for a project like this, and receiving one of the major sources of funding up front is a good way to go,” said Bob Crego, Valley Cares Executive, in a statement. “It’s a really big step forward.”

Valley Cares, an independent, non-profit organization that staffs and manages the 52-unit independent and assisted living complex in Townshend, received the grant from the Vermont Community Development program, the Reformer reports.

The funds will be used to add onto the existing building; the facility wants to construct 12 new one-bedroom assisted living units to address the growing need for more senior housing in the area.

If everything goes as planned, the first tenant could move into one of the new units by January 2013, Crego told the Reformer.

Valley Cares is partnering with Housing Vermont on the expansion, which will apply to the Vermont Housing Finance Agency for low-income housing tax credits. The non-profit will also apply to the Vermont Housing and Conversation Board for funding and will start campaigning for private donor funds.

Read the Brattleboro Reformer article here.

Written by Alyssa Gerace

Virtus Real Estate Capital, a private equity real estate firm based in Austin, Tex., is preparing to launch a $500 million fund –the largest in company history– to invest in “recession resilient” types of properties, including seniors housing, student housing, medical offices, and self-storage facilities.

Although Virtus hasn’t yet closed a senior housing-specific transaction, company founder and CEO Terrell Gates says they’ve been researching and analyzing the sector for several years.

“It just happens to be that it was one of our targeted property types when we made a shift in 2006 into a class of properties we consider to be recession resilient,” Gates told SHN.

The fund will be launched in the coming quarter, and will be invested across all four of Virtus’ targeted property types. No single category will represent greater than 40% of the fund, Gates says, and the firm will probably invest somewhere between 20% and 30% in senior housing.

This will be about $150 million of the fund, and taking leverage into account, that portion could translate into $350-400 million worth of senior housing product, he adds.

Virtus plans to invest primarily in independent living and skilled nursing facilities (SNFs), even though the latter sector has come under fire recently after reimbursement rate cuts and other budget-related issues.

“We like that space because barriers to entry are higher,” says Gates. “Not just anyone can jump into it and upset demand and supply metrics. It’s an asset type that’s well within the way of some major demographic types coming through the system, and there are far fewer beds than there’s going to be demand.”

This statement is backed up by a recent infographic released by Assisted Living Today showing the possibility that 42 million Americans may go without nursing home care by 2012, as the nation gets older and nursing homes close down.

“We’ll manage reduction in reimbursement rates, we’re going to target markets where we can target private pay,” Gates says. “Our general plan for those property types is to allow us to maintain yield, but also enhance it over time.”

Virtus also plans on investing in ground-up expansion or rehabilitation of facilities, and will work with operating companies under a master lease scenario, he says.

As for independent living, the other sector of senior housing the firm is looking to get into, Gates says they want to bring down the price point.

“We’re really focused more on the value segment of [IL],” he says. “The rent per bed is something that is more manageable for the vast majority of the senior housing community. Instead of doing the ‘full cruise ship model’ where everything is included, and you’re paying $1,500 to $2,000 per bed per month, we want to provide more of an ‘a la carte’ service basis where we offer services as needed.”

They like this value space because about $800 per bed per month is much more affordable for a majority of the targeted age group, Gates says.

Virtus has operating partners for both SNFs and ILFs, and Gates says that while its first independent living facility will probably be in the Midwest, it’s looking to the Sunbelt as the geographic location for the majority of its assets.

Written by Alyssa Gerace

Senior living provider TLC Management and real estate development company Leo Brown Group recently broke ground on a $17 million senior living community in Newburghon, Indiana.

The project, named The Village at Hamilton Pointe, will offer a full continuum of senior care, allowing residents to age in place thanks to the campus’s multiple senior living options.

The campus will feature 24 independent living units; a 53-unit Assisted Living Center with 20 units allotted to memory care in a separate wing; a therapy center for residents seeking short-term rehabilitation; and 115 skilled nursing beds for residents requiring constant care.

Now that construction has begun, residents are expected to move into The Village at Hamilton Pointe in the summer of 2012. When complete, the community is expected to create more than 160 new jobs.

The project has been financed through a conventional loan with a regional bank based in central Indiana, said Mike Brown, Vice President of Leo Brown Group.  Residents of the skilled nursing and rehabilitation portion of this project will utilize Medicare, Medicaid, or private pay and the assisted living, memory care, and independent living portion will be private pay.

Written by Alyssa Gerace

The Paces Foundation recently broke ground for Las Brisas Manor, an independent living community for low-income seniors in Del Rio, Texas. Construction is expected to start immediately, with the community due to open by summer 2012.

“The City of Del Rio is pleased to partner with The Paces Foundation, the Federal Home Loan Bank of Dallas, the Texas Department of Housing and Community Affairs, and Community National Bank, as well as others, to provide the all important basic need of housing for our seniors,” said the city’s mayor, Roberto Fernandez. “During this tough economic time, it is more important than ever to create lasting partnerships for the betterment of our communities.”

The more than $6.4 million in funding for the construction came from several sources, including a $500,000 Affordable Housing Program grant from Community National Bank and FHLB Dallas.

Upon completion, Las Brisas Manor will feature 48 units priced for low-income residents, including 15 one-bedroom units and 33 two-bedroom units, which will come fully equipped with Energy Star kitchen appliances.

“The Paces Foundation built the first Gold LEED certified seniors affordable living home in Georgia,” said Mark du Mas, president of The Paces Foundation. “Las Brisas Manor will be the first project for senior citizens built to Green Built Texas standards. Such sustainable building practices not only reduce our impact on the environment but also significantly drop the utility bills for our residents, which can sometimes take a large portion of their income.”

The foundation, which also built Las Brisas Apartments, a family-oriented affordable housing community located adjacent to the planned senior community, was one of 79 organizations to receive a portion of the $18.5 million in AHP grants awarded in 2010 by the FHLB of Dallas.

Written by Alyssa Gerace

The Claire, a luxury senior living facility targeting baby boomers has defaulted on municipal bonds used to finance the 53 story high rise that opened in December 2008 in Chicago’s Gold Coast Neighborhood.

The project was being financed by the Franciscan Sisters of Chicago, a charitable arm that initially looked to be a huge success. With entrance fees that start at about $540,000 for a one bedroom, the project was roughly 85% under contract before the opening.  As the real estate market continued to decline, many buyers were forced to cancel because they were unable to sell their home.

The weak economy and a housing-market slump for the past three years led to challenges that kept occupancy rates and revenue below projections, Judy Amiano, president and chief executive officer of the Franciscan group, said in a statement. The group said it elected not to make a scheduled debt payment due Sept. 1, which triggered a default notice.  The outstanding debt on the Clare is $216.5 million.

“This is the first step in a process of working collaboratively with our lenders to identify a permanent solution for the structure of the Clare’s debt in  the future,” said the nonprofit.

A spokeswoman for the Clare says about two-thirds of the building’s 248 units remain unsold. The news was first reported by Bloomberg News, which says it is the largest municipal bond default this year.

Chicago Retiree Tower Is Year’s Largest Muni Default

Written by John Yedinak

After home values tanked as much as 30% from 2006 levels in certain parts of the country, according to Case-Shiller home price indices, some senior housing operators have been forced to purchase seniors’ homes in order to attract new residents to their facilities.

Home purchase programs function as an agreement that a senior housing company will purchase a prospective resident’s home after it has spent a certain amount of time on the market without selling. The house is generally purchased at a previously agreed-upon price, usually obtained from a third-party appraisal.

Most programs have different components as to how long a house must remain on a market, and at what price, before the senior living company buys it. The program allows seniors to enter a senior living community with a down payment, rather than paying the full cost of the entrance fee up front. The house’s eventual sale then functions as a promissory note, and its proceeds go to pay off the rest of the entrance fee, with any remainder going back to the senior.

Brookdale Senior Living, headquartered in Brentwood, Tenn., is one such company that offers this, although Chris Bird, a divisional vice president of operations, says it’s not exactly a common practice as only 12% of the company’s communities have an entrance fee; the rest are rental.

“For Brookdale, it’s a practice that we brought back to the table in 2008, when housing started to slow down, and prices started to erode in resale values,” says Bird. “We wanted to inject some opportunities for seniors to enter Brookdale Living.”

That year, 15% of residents entering the communities that offered the home purchase contract utilized the program. One-quarter of incoming residents used the program in 2009, and by 2010, nearly four out of ten, at 38%, participate in a form of the program, says Bird.

Since the housing purchase program started in 2008, Brookdale has seen an uptick in sales and occupancy, and now in 2011, move-ins have increased 31%, says Bird.

While occupancy rates remain steady in independent living facilities, at 87.4% in the second quarter of 2011, a slight decrease from the previous quarter, this can be attributed more to high demand paired with low supply rather than seniors flocking to pay steep entrance fees, according to data from the National Investment Center for the Seniors Housing and Care Industry. Seniors housing annual inventory growth was down 2.1% for the quarter compared to the previous year, the lowest level seen in the current market cycle.

In response, Windsor Parks, located near Chicago, Ill., is another retirement community that offers a home purchase program, implemented in 2009. It’s been extremely beneficial to the community, says Julie Gambino, director of sales and marketing at Windsor Parks.

“We want to get people to move in, and it’s harder for older adults to sell their homes in the current market. I do foresee that there will continue to be a need for this program,” says Gambino.

Although a better housing market will limit the need for such a program, Gambino says those days won’t arrive for a while.

“As the economy changes, there will be less of a need because houses will be selling quicker. Until 2018, at least, the forecast is that the Illinois market won’t be stable, and we want to get people moved in in the meantime,” she says.

Windsor Park facilitates its home purchase program through Moving Station, whose senior division works with multiple retirement communities throughout the nation. Vice president Patti Saulig says the housing market won’t get better for another few years, furthering the need for her company’s services. She says there will be ongoing concern for seniors about selling homes, and this extends to the FHA-insured loan limit reduction.

“We do not see the real estate industry turning around in the next couple years,” says Saulig, adding that she thinks it will get worse before it starts to improve.

The Department of Housing and Urban Development recently announced that the limit for FHA-insured loans will be lowered from $729,000 to $625,000 in October. The lower limit means some borrowers will be unable to get an FHA-insured loan, which by extension means it will be even harder for baby boomers to sell their homes and downsize into alternative living arrangements, such as independent living facilities or continuing care retirement communities.

“Anything that limits what today’s borrower can qualify for ultimately affects anyone trying to sell a home these days,” says John Walsh, president of Total Mortgage Services, LLC, based in Milford, Conn. ‘“This reduction in the FHA limits will definitely affect some people’s ability to purchase a home once the new limits are put into effect.”

Both Saulig and Bird agree that there will continue to be a need for home purchase programs in the next few years, although many hope the service won’t be necessary for too much longer.

“The intention is, these are short-term programs,” says James Janicki, the senior director of marketing for Riverside Health System, located in Virginia. “When the economy rebounds, we don’t expect to have those.”

Although only two people have entered Riverside’s home purchase program since they began offering it in 2009, it has increased leads, says Janicki, adding that many people who were initially drawn in through the program went on to choose another financing option.

“It definitely made incremental sales that we wouldn’t have made without the program,” he says. And while some didn’t feel comfortable with the program’s guidelines—Riverside agrees to buy a house if it hasn’t sold after being on the market for 15 months, at 80% of its appraised value—”Others viewed it as peace of mind, knowing their house would be sold.”

Written by Alyssa Gerace

Benefis Health System recently broke ground on its first continuing care retirement community, the Grandview at Benefis, in Great Falls, Mont.

The 42-acre campus, which will have 140 units, will cost about $67 million. Construction is due to start imminently, and is expected to be finished in 2014. Residents will consist of a range of seniors, from those who are active, to those who require assisted living or nursing care.

“This concept actually brings together independent living housing with the other parts of continuing care, assisted living, and a new concept in skilled nursing. We call it skilled nursing cottages,” says Frank Soltys, director of Benefis Senior Services.

The campus will include 15 houses, 77 independent living apartments, and 48 assisted living apartments. Half of the houses and a third of the independent living apartments have already been claimed with deposits by interested future residents.

Written by Alyssa Gerace