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12 Takeaways from the 2018 NIC Fall Conference

Panelists at the National Investment Center for Seniors Housing & Care's Fall Conference addressed the need for multigenerational housing for seniors, affordability issues and lending on skilled nursing facilities.

The Fall Conference of the National Investment Center for Seniors Housing & Care (NIC) taking place this week in Chicago featured topics of discussion ranging from the role of AI technologies in seniors’ care to creating enticing living spaces for baby boomer seniors to the complicated process of underwriting loans on skilled nursing facilities. Here are some takeaways from Thursday’s sessions:

  1. Emerging AI technologies might eventually be able to help seniors with domestic tasks, according to Professor Vivek Wadwa, author of Driver in the Driverless Car: How Our Technology Choices Will Create the Future. Wadwa predicted that by 2025 Rosie the robot should be dexterous enough to thread a needle or do housework tasks.
  2. During a panel on “Understanding Boomers,” getting seniors housing developments ready for the first baby boomer customers in eight-nine years was a major talking point. These 60- and 70-somethings are looking for very specific features in their living situations and the market needs to change to address the needs of this group, and not just cater to the typical “older adults,” according to panelists Tim Carpenter, founder and CEO of EngAGE, Manny Gonzalez, managing principal of KTGY Architecture + Planning, and Bryce Turner, president and CEO of BCT Architects.
  3. The panelists cited research that shows that when older adults have a sense of purpose, their chances of having a stroke are reduced by 71 percent, their hospital stays are reduced by 61 percent and they have a 32 percent reduction in doctor visits. New types of living spaces for seniors that incorporate mixed uses and multigenerational occupancies can create this much-needed sense of purpose and diversity in day-to-day routines.
  4. Developers need to be creative and plan seniors housing residences near local retail establishments and walkable outdoor areas to enhance occupants’ quality of life. One example would be the Village at Valley Forge in King of Prussia, Penn., a multigenerational community that incorporates senior living units and is located adjacent to King of Prussia Mall. With unique landscaping and lots of shops, the community offers seniors the opportunity to walk and enjoy the outdoors. “There’s a way to incorporate affordable and informal urban community props, such as hammocks and rocking chairs, in urban spaces,” said Bryce Turner.
  5. Millennials and seniors are both interested in walkable communities and living near grocery stores, farmers’ markets and outdoor spaces. Seniors do not want to be pigeon-holed in seniors-only buildings and prefer intergenerational housing, the panelists said. In addition, developers and architects need to build social spaces in order to combat the feeling of isolation seniors can often experience. “I want to go to a place, not a [seniors] community,” said Turner. “It should be recreation-oriented. The baby boomers… want music, a place with healthcare, and lots of amenities.”
  6. Developers should also keep in mind that many boomers have not saved more than $25,000 and affordability and delivering cost-effective housing is essential, said Dan Hutson, chief strategy officer for HumanGood, California’s largest non-profit provider of seniors housing and services. For example, it might make sense to find an undervalued property and redevelop it, which can lower construction and operating costs. It’s optimal to repurpose older buildings.
  7. Skilled nursing facilities can still be a good investment as long as long as they meet certain criteria, according to S. David Selznick, CIO of Kayne Anderson Real Estate, an investment firm that specializes in alternative properties. “We see a compelling opportunity with the right states with a favorable reimbursement structure that will pay out. But we need a solution so no seniors are on the street, and the government needs to work on reimbursement programs,” Selznick said during a panel on “Lending and Financing in a Rising Cap Rate Environment.”
  8. Cap rates on seniors housing properties have not yet shown significant changes, but rising interest rates will have an impact on buyers, said Donika Schnell, senior managing partner with bank MB Financial.
  9. Schnell added that in today’s market, “A lot of banks struggle with cash out requests,” but if the deal makes sense and is done at an appropriate debt yield, will do it. “If someone has been a performer for a long time and there’s a long-term relationship, a deal is okay.”
  10. When looking at price per bed at skilled nursing facilities, lenders are underwriting with a potential exit in mind, Schnell noted. “Appraisal is just checking a box. We really look at cash flow and Medicare reimbursement in that particular state.”
  11. When inspecting a potential skilled nursing facility deal, it’s important to look at state surveys to evaluate if there are repeated instances of falls, bed sores and a negligent management and operations team, Schnell added.
  12. The panelists also advised looking for deals where the property operator and developer are the same entity, so the operator has an appropriate level of interest in the property’s success. If a developer uses a third-party operator, it’s a flawed structure, they noted.
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