Looking Into the Future of AssistedLiving

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Looking Into the Future of Assisted-Living

• A Presentation for the
• Ohio Assisted Living Association
• Winter Conference - December 8, 2008
• By
• Rob Vogt Nancy Patzer
• VWB Research

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WHATS IN THE FUTURE FOR AL?

• Analyzing senior housing markets Revealing
  healthy markets
• Supply and demand trends and projections
• Development potential for private pay assisted
  living A look at Ohio's 88 counties

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ABOUT VWB RESEARCH

• VWB is a full-service real estate market research
  firm.

• Senior Residential Care

• Housing

• Office

• Retail

• Strategic Planning

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ABOUT VWB RESEARCH

• Experience in all 50 states, Canada, and U.S.
  Territories
• The majority of our senior residential care
  studies are for small- to medium-sized developers
  and operators of AL, IL, and Nursing Care.

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DETERMINING MARKET POTENTIAL FOR ASSISTED LIVING
Tools that Reveal Healthy Markets

• Market Feasibility Analysis
• Case Study Analysis

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MARKET FEASIBILITY ANALYSIS

• Analyze the site
• Define the Primary Market Area (PMA)
• ID and track demographic and economic trends
• Survey existing and planned supply and identify
  close comparables
• Calculate potential support
• How many age-, income- and asset-qualified
  households?
• What is the need for ADL assistance?
• What is the Alzheimers affliction rate?

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MARKET FEASIBILITYA Case Study

• In 2006, we conducted a market feasibility study
  for an AL facility located off of Stringtown Road
  in Grove City
• The facility, developed by the Jerry McClain
  Companies, is now operated by Emeritus
• The facility opened in Q42007

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MARKET FEASIBILITYPMA Map
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MARKET FEASIBILITYSenior Facilities Map
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MARKET FEASIBILITY Conclusions and Absorption
Projections

• Retail, residential and health care services
  hub for southern Franklin County
• Pinnacle Development is attractive to younger
  households
• The market area has a low level of competition
• High growth in 45-64 households and 75
  households
• We projected absorption of 6.5 beds per month
• 4.0 for Assisted Living
• 2.5 for Alzheimers
• The facility has experienced an overall rate of
  7.0 beds per month.

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CASE STUDY ANALYSIS National IL/AL Provider

• We studied a large national providers portfolio
  of independent-living and assisted-living
  facilities
• We found consistencies in key socio-economic
  variables (performance indicators)

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INDICATORS FOR SUCCESSFUL MARKET AREAS
1. High Per Capita Income 2. High Per Capita
Income Growth Rate (2008-13) 3.  Low Unemployment
Rate 4.  Low Diversity Index 5.  High Median
Household Income (MHI) Age 35-60 6.  High Median
Household Income Age 60 7.  High Median
Disposable Income 8.  High Median Net Worth 9. 
High Median Value Owner Occupied Housing
Units 10. Low Commute Times
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SUPPLY AND DEMAND CHARACTERISTICS
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BASELINE SUPPLY ANALYSIS

• U.S. Building Trends and Occupancies
• Statewide Building Trends
• Characteristics of National AL supply compared
  with Ohio

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CCRC OCCUPANCIES DROP 2005 TO 2007

• Occupancy rates for independent living increased
  from 92.4 in 2005 to 95.0 in 2007
• Rates for CCRCs and endowment communities
  dropped from 93.0 in 2005 to 90.7 in 2007
• In marginal markets, we have observed
  endowment/entrance fee communities absorbing
  more slowly
• The housing crisis is a factor in this trend

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AL BUILDING TRENDS IN THE U.S.

• After a surge in building in the 1990s, many
  assisted-living markets became saturated
• Building trends have waned, and nationally, AL
  occupancies are again climbing
• The American Seniors Housing Association
  occupancies for U.S. assisted-living facilities
  increased from 90.4 in 2005 to 94.4 in 2007

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GROWTH IN OHIO AL FACILITIES AND BEDS 1998 - Q3
2008
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567 OHIO AL FACILITIES BY YEAR OPENED
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40,501 OHIO AL BEDS BY YEAR OPENED
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AL AND NC BALANCING THE RATIO

• From 1992 to 1998, the number of Assisted Living
  residents more than doubled (56.3) in the U.S.
• The number of nursing home residents declined
  4.8
• The ratio of AL to NC was 13 in 1998. This
  ratio increased to 12 in 2006
• Nationally, AL and NC beds will continue to
  balance out
• Nursing facilities will continue to target a
  wider income range
• The number of private pay AL beds will approach a
  11 ratio to nursing care beds within the next 10
  to 15 years

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AARP on U.S. Nursing Home Trends
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BIG CHAINS EXPECT TO GET BIGGER

• In June 2007, Provider magazine profiled the
  countrys Top 40 Assisted Living Chains (160,980
  beds)
• 35 chains reported an overall occupancy rate of
  91.0
• The five largest contain 88,385 beds at 90.7
  occupancy
• The five smallest, 3,054 beds at 81.9 occupancy
• High performance is often the result of name
  recognition, advertising
• Management may crimp performance levels, creating
  continued shuffling of this deck

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MERGER AND ACQUISITIONS

• 2007 Emeritus (203 facilities) merges with
  Summerville (77 facilities)
• 2007 Ventas investment firm acquires 79 Sunrise
  facilities
• 2007 Brookdale Senior Living acquires 15
  communities including six AL facilities
• 2008 Capital Senior Living (32 facilities)
  backs out of deal to acquire Hearthstone Senior
  Services (32 facilities)

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FORECAST Tougher Competition In Ohio

• Seven of the top 10 U.S. chains have a presence
  in Ohio
• Big players will be stepping up coverage
• Ohio will foster increased competition as medium
  and large players fill in service gaps

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SUPPLY TRENDSAL UNIT SIZES ARE INCREASING . .
.

• We have seen down and up trends in unit sizes
  over the past thirty years of AL development
• During the building boom of the 1990s, AL unit
  sizes became smaller
• Increased competition and market demand has
  created a post-2000 trend toward larger unit
  sizes.

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DRAMATIC CHANGES HAVE OCCURRED WITHIN SMALLER
UNITS IN OHIO
Source VWB Research
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ONE-BEDROOM UNIT SIZES DIDNT CHANGE MUCH
Source VWB Research
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NO BIG CHANGES IN TWO-BEDROOM UNIT SIZES EITHER
Source VWB Research
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MEMORY CARE UNIT SIZES DIPPED DRASTICALLY IN OHIO
FROM 1990 to 1999
Source VWB Research
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TRENDS IMPACTING DEMAND

• Increased life expectancies will change the
  profile of AL residents
• Silver Tsunami generation of Baby Boomers (born
  1946 to 1964) is nearly 80 million strong
• Increased prevalence of healthier residents
  with more Dementia/Alzheimers and Memory Care
  issues
• Forms of Payment to Become More Diverse

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LIFE EXPECTANCIES INCREASING STEADILY

• CDC reports record-high life expectancies (2005)
• White males (75.7 years) and black males (69.5
  males)
• White females (80.8 years) and black females
  (76.5 years).
• Residents are entering facilities at an older
  age.
• AARP reports in 1995, median age of an AL
  resident was 83, in 2005, the median age was 85.

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MEMORY CARE

• Over half (52) of AL residents have some
  cognitive impairment.
• VWB Alzheimers/dementia beds comprise an
  estimated 13.1 of Ohio AL beds
• National estimates range from 15.0 to 18.0 of
  all AL beds (2005).
• VWB Many markets could support additional
  memory care bedseven those that are saturated
  for assisted-living

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ALZHEIMERS AND AGING

• 2008 an estimated 5.2 million Americans have
  the disease
• An estimated 10 million baby boomers will have
  Alzheimers by 2050
• From 2000 to 2010, Ohio individuals with
  Alzheimers is projected to increase from 200,000
  to 240,000.
• This is a 20 increase in a decade.

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ALZHEIMERS RISK INCREASING

• Alzheimers is the fifth leading cause of death
  for 65 individuals.
• Three other leading causes of death (heart
  disease, cancer and stroke) continue to decline,
  enabling people to live longer.
• Unless new treatments are developed . . .
• The risk for Alzheimers disease will increase
  substantially
• The need for secure Alzheimers beds will double
  over the next three decades

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OHIOS LOWER SHARE OF ALZHEIMERS BEDS SHIFT IN
BEDS BY UNIT TYPE
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FORMS OF PAYMENT DIVERSIFYING

• States are exploring ways to provide long-term
  care to low-income seniors, such as affordable
  assisted living
• Home and Community-Based Waiver programs for
  assisted living have expanded nationwide (44
  states)
• Ohio is one of the most recent states to join in
  this expansion (2006)

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OHIOS MEDICAIDWAIVER PROGRAM

• Implemented in July 2006
• As of October 2008, 121 of 567 Ohio licensed
  facilities are certified to accept Waivers
• Certification rate of 4 to 5 facilities per month
• U.S. (2008), 96 of AL beds in the U.S. are
  private-pay
• OHIO (2008) 98 of AL beds are private-pay
• Assisted Living Federation of America (2008)
• VWB Research

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OHIO PARTICIPATION IS GROWING

• In October 2007, 70 providers participating, 300
  clients enrolled
• In October 2008, 121 providers participating, 857
  clients enrolled
• 73 increase in providers 186 increase in
  clients
• 403 clients on waiting list in 2007 500 in 2008

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TOP 10 COUNTIES FOR WAIVER OCCUPIED BEDS
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DISABILITY RATES HIGH, REIMBURSEMENT LOW

• 50 of AL Medicaid waiver residents have 4 ADL
  assistance needs, 75 have 3 ADL needs
• The average AL resident needs help with 2.3 ADLs.
• State of Ohio 2,700 monthly reimbursement rate
• Scripps Gerontology Center 3,240 per month in
  costs
• The Scripps rate is 20.0 higher than the Ohio
  rate.
• Growing disparity between costs and reimbursement
  will increase waiting lists, force change

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STATE-SPONSORED AFFORDABLE AL

• Arkansas, Iowa and Illinois have tax credit
  programs in place now
• One Iowa operator of affordable assisted living
  facilities comments that 25 of residents come
  directly from nursing homes
• This genre offers a scaled-down AL environment
  that is more homelike than institutional

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TRENDS BUILDING AND STAFFING

• Flexible building plans to accommodate a large
  variety of care and service levels
• Care delivered by a wider variety of caregivers
• Family care-giving will supplement staffing to
  save costs for lower-income residents
• Increased legislation allowing unlicensed staff
  to provide a wider variety of assistance services
  
• Continued increase in larger units
• decrease in sleeping rooms
• Increase in one-bedroom or two-room suites

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A look at Ohios 88 CountiesDetermining Market
Potential for AL
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HOW WE CALCULATE SUPPORT FOR AL

• Income-qualified 75 households
• Asset-qualified 75 households
• Convert to individuals
• Need for ADL assistance (3 or more ADLs)
• Compare this with the number of existing
  facilities/beds

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OTHER FACTORS WE CONSIDER

• Children of residents-household trends
• Cultural differences
• Ease of access to primary transit routes
• Availability of other care options
• Family/friends/other caregivers
• Home health care
• Adult day care
• Hospitals and doctors

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TOP 10 COUNTIES-PERCENTAGE GROWTH 75
POPULATION 2008-2013
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TOP 10 GROWTH IN TOTAL NUMBER OF 75
POPULATION 2008-2013
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TOP 10 GROWTH 45-64 INDIVIDUALS 2008-2013
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BIG 3 METRO AREAS GROWING STRONG

• 75 Households projected to be strongest within
  outlying counties around Columbus, Cincinnati,
  and Cleveland.
• Percent and number growth is strongest in
  counties ringing Columbus and Cincinnati
• Franklin and Fairfield Counties also have strong
  growth projections for 45-64 households

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PERCENT GROWTH IN AL BEDS 1998-2008
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GROWTH IN AL BEDS 1998-2008
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BEDS TO SUPPORT RATIOS
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TOP 10 COUNTIES WITH THE HIGHEST RATE OF AL
BEDS TO SUPPORT(These ratios suggest that these
counties could be saturated)
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6 COUNTIES HAVE NO AL FACILITIES, BUT 3 APPEAR
TO HAVE DEVELOPMENT POTENTIAL
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10 COUNTIES WITH THE LOWEST RATIO OF AL BEDS TO
SUPPORT(Total licensed beds / total support
2008)
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AND THE WINNERS ARE . . .

• Fulton Countyno development over the past 10
  years is surrounded by sparsely developed
  counties
• Lawrence Countyeven while it is surrounded by
  saturated counties, Ironton could support a
  smaller AL facility
• Pickaway Countyhigh growth rates for 75, low
  number of facilities, continued migration
  southward from Franklin County

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MORE WINNERS . . .

• Jefferson County low ratio of beds to support,
  adjacent to Carroll County which has no beds
  relatively large amount of estimated support
  (200)
• Licking and Fairfield Countiessurrounded by
  balanced AL counties, plus high growth of 75
  population
• Clermont Countywill continue to draw population
  and households from Hamilton County, very low
  ratio of beds to support

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• VWB Research
• 869 West Goodale Boulevard
• Columbus, OH 43212
• www.vwbresearch.com