Memory care is getting a lot of developer and investor attention today because of projected massive growth of the sector. As the swell of seniors quadruples during the next 15 years, the demand will rise even faster for properties that can care for residents with limited mental capacities.
The amount of people 65 and older is expected to increase by 50 million in the U.S. by 2020. Though assisted living facility development has been a hot sector for the past decade, memory care has been just a small part of the offerings. However, advances in health care, medicine and physical fitness are expected to keep people living longer.
“While there have been many scientific advances in health of the body, they’re still behind on figuring out how to keep the mind going,” says Kenneth J. Carriero, regional director and senior vice president of the National Seniors Housing Group at Colliers. “Families who can’t afford assisted living may have tried to take care of mom and dad, but when it gets into a memory care situation, there isn’t really that option. You can’t leave them home by themselves, and they require constant care.”
Sharon Yester, chief asset manager for CNL Financial, says for each five years after age 65, the likelihood of memory loss goes up. At 65, only 3 percent to 4 percent will need memory care, but this increases to 8 percent by age 70, 15 percent at age 75, 25 percent to 30 percent by age 80, and will affect almost one out of every two people who reach 90 years old.
“There’s also the concern that with families being separated,” she says. “Years ago, you lived close to your parents your whole life, but now it’s more acceptable to live across the country from family. There needs to be a place where seniors can go and the children can know that they’re safe.”
Typically, she says, seniors with memory loss are a danger for three reasons—forgetting to take medication, trouble with normal day-to-day tasks and being apt to wander. “Any of these behaviors, even not being able to cook or shop for things because you can’t remember how, can be debilitating,” Yester says.
She says CNL’s health care REITs are focusing more on memory care, such as the Sunrise on Connecticut Avenue in Washington, D.C., owned by CNL Healthcare Trust, which has a wing dedicated to the seniors. Having a mixed property allows seniors to move from one section of the property to another without having to give up friends and learn a new property, Yester says.
Michael Berne, managing director of Lee & Associates’ new senior housing group, says he’s seen a pickup in development, as a few of his clients are quickly adding memory care wings to their properties. “You’re seeing it in almost every setting, full memory care facilities popping up all over the place,” he says.
A number of companies are looking to build full memory care facilities, Berne says. One client he says he can’t name is pushing a large investment project for these properties. “They’re raising close to $200 million to build 10 memory care facilities between Texas and Florida,” he says. “Based on how it’s being received by the investment community, it’s going well. They recognize the need and demand is out there.”
He says though there’s about 6 million seniors who need memory care residential today, that number will triple in the next 20 years. Properties not financially feasible for regular assisted living or market rate seniors property will be possible to finance for memory care, Berne says, as it’s a costlier facility to run. “There’s the need for more staff, and they’re a little better trained, they have to deal with a number of different types of dementia. The true cost to operate is higher, and the rents will reflect this.”
Jason Dupont, financial director for the LaSalle Group, agrees that costs are higher at memory care facilities. His firm owns 27 properties, all memory care, and has a set building pattern of about 46 units in 26,000 square feet. “We receive rates about 20 percent to 30 percent of what you’ll get for normal assisted living,” Dupont says.
He says the demand today, plus the costs involved, allow the company to continue building three to five new memory care properties per year. “When we go into the markets we want to build, we’re seeing in many cases a 10-to-1 demand to supply ratio,” Dupont says. “Other developers are seeing this as well. There are a lot of banks now working on the dementia side. However, we’re pretty established, and we can get past the barrier to entry of needing a significant, experienced operational team to handle memory care patients.”