Arecession can be the best time to grab market share. That's the strategy at Aegis Living, a seniors housing owner and operator with 35 properties and several more in the works. “This is the time to gain momentum,” says Dwayne Clark, chairman and CEO at the Redmond, Wash.-based company.
Most Aegis properties are assisted living buildings that include dementia care. Aegis also manages several continuing care communities for Oakmont Senior Living, run by Bill Gallaher, who started Aegis with Clark.
The Aegis approach is like the story of the Kellogg Co. during the Great Depression, he says. The company continued to advertise and expand, while its rival Post Cereal cut back on marketing.
Kellogg eclipsed Post and gained valuable market share. “We don't want to be a giant company like a Kellogg,” says Clark. “But when everyone else is withering, our plan is to pull ahead.”
Timing is everything
A big factor in Aegis' expansion is the low cost of development. Lumber prices, land costs and interest rates are at 20-year lows, says Clark.
Aegis opened its newest property about a month ago in Bellevue, an upscale suburb of Seattle. The project features 86 units, including 18 units designed for memory loss residents.
The Aegis building is located just two blocks from the Bellevue shopping district, one of the nation's premiere high-end retail spots. The building also is near Lake Washington and the ritzy suburb of Medina, home of Bill Gates.
Aegis prefers neighborhoods where average home values are $400,000 or higher. “We want to be in dense neighborhoods populated by people who have the ability to pay,” says Clark.
The Bellevue facility had been a failed condo project. “It was an opportunity for us because the shell of the building was already there,” says Clark. “We just reconfigured the inside.” The company would like to find similar buildings.
The depressed housing market has slowed the lease-up of new facilities, since seniors who move to assisted living often sell their homes before moving. The lease-up process of a new facility now takes about 18 months compared with 12 to 14 months several years ago.
Finding niche value
Aegis has 12 properties in the Seattle area, including the new Bellevue project. That makes property management easier because services can be delivered to a cluster of buildings, saving time and money. And the Aegis brand gets a boost from coordinated marketing plans.
Monthly rents at Aegis of Bellevue start at about $2,900, but can go as high as $10,000 for a resident living in the dementia-care portion of the building. Rents across the portfolio rose 6% on average last year. A similar increase is expected this year.
Aegis has been able to secure conventional bank financing for its new projects. Equity contributions that had been as low as 12% several years ago are now up to 30% of the project value.
The seniors housing firm has had some success developing buildings for niche groups. Aegis Gardens, an assisted living building in Freemont, Calif., caters to Asian Americans. It's been open five years and is 100% occupied.
Staffers speak Chinese. Cuisine and activities are geared toward the Asian residents. Clark says it took two to three years to work out the glitches, but now he's exploring opening another Asian community in the San Francisco area.
Aegis also hopes to boost market share by recruiting seasoned employees. With high unemployment, Aegis has been able to hire top-notch managers.
About 75% of the company's executives come from the hospitality and restaurant business, instead of the seniors housing industry, according to Clark. Many companies are failing to take advantage of the situation, he says. “A lot of talented people are looking for a good place to work.”
Jane Adler is a Chicago-based writer.