The alarming rise of dementia bodes well for Silverado Senior Living, a quickly growing owner and operator of memory-care buildings. By one estimate, 16 million Americans will have Alzheimer's disease by 2050. That figure doesn't include people with memory impairments due to other causes such as stroke or illness.
Bolstered by those demographics, Silverado is carving out a highly specialized niche and making a tidy profit, too. The 10-year-old private company has 16 upscale assisted living buildings geared for persons with dementia, a group that is often difficult to care for at home. Silverado’s properties are in California, Texas and Utah. A handful of new projects are under way.
“We will continue to expand and to focus on memory robbing disease,” says Loren Shook, CEO of the San Juan Capistrano, Calif.-based company. “One of the challenges we face is to make each (building) world class.”
Silverado recently bought an existing assisted living building in the choice Turtle Creek area of Dallas. A $1.2 million renovation is under way there. The company just closed on a property in Belmont, Calif., in the San Francisco Bay area, with plans to renovate it. Two Los Angeles properties are also being revamped.
“Silverado is really well-positioned,” says Michael Berne, head of seniors housing and healthcare at brokerage Cushman & Wakefield in New York. “The company is tightly focused on people with dementia. Silverado's growth is not surprising.”
Annual revenue at Silverado should hit about $100 million this year. That's up from $82 million in 2006. “We plan to grow (revenues) about 20% to 25% a year,” Shook says. Annual operating profits are about 30%. Silverado operates two other business lines: hospice care, and home care.
Silverado currently owns nine of its buildings. REITs and investors own the others. But, Shook says, “We would like to own all of them.”
Shook's strategy is to buy underperforming properties and turn them around. The buildings are redesigned so residents have easy access to all areas of the facility. By contrast, the typical assisted living building has a separate dementia wing, which is often a locked unit.
Silverado also beefs up staffing, and adds new programs. Every building has live-in pets — dogs, cats, birds, and even pot-bellied pigs. Residents can have their own pets too. Staffers are allowed to bring their children to work to boost intergenerational interactions. “We're different from other operators,” says Shook.
Silverado does have competition. Sunrise Senior Living and Brookdale Senior Living, both publicly traded companies, have a smattering of freestanding dementia care buildings. But Silverado's main rivals are local assisted living buildings that take all kinds of residents, not just those with dementia. “The competition is not overwhelming,” says Berne of Cushman & Wakefield.
The occupancy rate at Silverado properties currently averages 92%. Rents are raised about 5% a year, according to Shook. The average length of stay is 18 months.
Silverado is pricey. Shared rooms cost about $6,200 a month. Private rooms are $11,000 a month. That compares to an average of about $3,000 month at traditional assisted living buildings.
Residents and their families pay the cost. They're willing to do so because, in many cases, the only alternative is a nursing home — an option even more costly than a room at Silverado. But unlike a nursing home where a resident may qualify for help from the government's Medicaid program, Silverado is all private pay. About 12% of Silverado residents have long-term care insurance, which pays the bills.
The care is expensive because of a high staff-to-resident ratio, Shook explains. Each resident has a case manager who coordinates care. Every building has licensed nurses, certified social workers and highly paid administrators.
A large staff means residents get a lot of attention, reducing the need for sedating medications and producing better outcomes, says Shook. He likes to tell the story of a resident named Edith who had been bedridden in a nursing home. She moved to Silverado and the staff found out she liked cats. Edith was assigned a cat and a month later, she was at a racetrack cheering on her horse. “We change lives,” says Shook.
Looking forward, Shook plans to buy land and build facilities from the ground up. Ideal areas for development include Northern and Southern California, and Texas. But growth will be managed, emphasizes Shook, in order to maintain quality. “We need the discipline to turn down enticing real estate deals.”