Seniors Housing Weekly Update - Recommendations On A Seniors Housing Bubble

December 17, 2013

 
December 17, 2013. 60 Seconds with Steve Monroe. Viewers responded to last week's post about a looming seniors housing bubble.

Recommendations On A Seniors Housing Bubble

Last week, I talked about the possibility of a bubble in seniors housing, and I asked you to let me know your thoughts. While I didn’t hear from every Tom, Dick or Harry, I did hear from a few others. First were some New Year’s resolutions for providers from Jim Moore. Number one was that they should be focusing on organic growth with their existing properties. This would include occupancy enhancement, with the 70%-plus operating margin on census increases above 85% that comes with it. Nothing like a full community to attract new residents! The second was expense reduction, with the significant impact that just a $1.00 per resident day reduction in expenses can have on the bottom line, being careful to balance that while trying to move the needle on census. We also heard from Gary, who agreed that we have to watch the growth of new development, but who pointed out that even though assisted living and memory care development is now 5.2% of existing inventory, 43% of those 10,000 new units are in just five metro markets. This implies that the vast majority of the markets have a long way to go before a bubble grows big enough to pop. We can only hope.

 

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Housing and care versus affordability

I see many new assisted living projects, high end rentals or high end for sale communities for those over age 55 but the real question is what is and will be built that meets the budgets for those who are not poor but not wealthy?

Bubble

Steve, The pace of new development has been nagging at me for awhile and it is mostly a gut feeling that we have been here before. Other than you, the experienced folks I talk to are not concerned, but I agree that it will be the inexperienced investors and lenders that will get this done,if it happens. Happy holidays. Casey

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