Dr. Carl Rowe at the new Integrated Care Communities Assisted Living Residences under construction
on the grounds of Riverside County Regional Medical Center.
Senior Housing Faces Wrinkles
by Joseph Ascenzi
When developers look at the senior housing market, they see potential as the first of the so-called baby boomer generation begins to retire.
The senior housing market started to boom about three to five years ago and has yet to hit its peak, said Tony Ferrero senior vice president for Kisco Retirement Communities in Carlsbad, which operates 12 senior care facilities in six states.
But with that potential for growth comes possible pitfalls. Senior housing is expensive to build and operate, according to those familiar with the market. It also requires many extra design elements, including increased fire safety, perimeter fencing and emergency “nurse call” systems in bedroom and bathrooms, depending on the level of care they provide.
Carl Rowe, managing member of the nonprofit Integrated Care Communities LLC, which is building a 68-bed assisted care facility in Moreno Valley, said profit shouldn’t be the primary motive for someone entering the senior-housing market.
“If you don’t have some altruism in you you’re going to get killed,” Rowe said. “Don’t go into this thinking you’re going to sell out in three years and make a million dollars, because that’s not going to happen. If you have a 5% profit margin, you’re doing well. But it’s a solid 5%.”
TOUGH BUSINESS
Senior care facilities are difficult to staff, because employees require special training, and they can often find easier work that pays just as well.
Labor comprises about 60% of the operating costs at Marriott MapleRidge of Hemet, an assisted care facility for seniors owned by Marriott Senior Living Services Inc., General Manager David Bray said.
“The industry is kind of upside-down now, because the cost of labor has skyrocketed during the past few years,” Ferrero said. “You need 50 to 70 full-time employees to run some of these places.”
Senior care facilities often are slow to fill, so investors don’t always get their money back quickly, and keeping the homes filled with tenants can be difficult.
Occasionally, things go badly. In 1999, Managed Assisted Care Services ran afoul of the state Department of Social Services and closed 33 of its homes, including six in Murrieta.
Last year, Marriott Senior Living Services Inc. dropped its plans to build a senior-care facility in Riverside, in part because of doubts about the overall future of the market. The company remains in business, though at the time it said it was “reevaluating” its place in the assisted-care housing field.
Anyone considering getting into the senior housing market had better do their homework, according to Barry Kamel, president of the multifamily division of the Sares-Regis Group, a real estate development company in Irvine.
“It’s difficult to operate (a senior housing project) if you don’t get some federal or state money, because they’re so expensive to build,” Kamel said. “You also have to build in an affluent area, because the (monthly) rates are large. It costs a lot to live in these places.”
WORTH EFFORT?
Difficult or not, developers plan to get into the senior market, or are already there. Senior housing and its components are “a serious market,” that will only grow, said Kamel, whose company has yet to make its first move into the Inland Empire.
Shea Homes for Active Adults announced plans earlier this year to build two 1,300-home communities for active seniors in La Quinta and in Glen Ivy, an unincorporated community near Corona.
The Fountains at Temecula opened earlier this year, and another senior care facility, Sterling Senior Communities, is located just outside the city, said Grant Yates, assistant to the city manager in Temecula.
The Inland Empire will get more than its share of senior housing, mainly because land in the area is more affordable than elsewhere and because so many retired people live in the region, said Annie Gerard, vice president of the seniors and multihousing research department for National Survey Systems, a consumer and market research company in Irvine.
“There was a lot of Wall Street money available for (senior housing) during the mid-1990s, and a lot of people who got into the market crashed and burned” when that source started to dry up, she said. “There was a lot of consolidation, and the market became very competitive.”
And because of better overall health care, people are living longer, Gerard said.
“The market is going to get bigger because it has to get to bigger,” she said. “The demographics are forcing that to happen.”
Data provided by the U.S. Census Bureau support her contention. Nationally, the 55-to-64-year old population stood at 24 million last year, and it’s expected to rise to 39.5 million by the year 2025.
In California, that population group is expected to jump from 2.4 million to 4.7 million over the same period, according to the bureau.
Rowe said those kinds of numbers will keep developers in the senior-housing business, despite the cost.
“You can’t escape the fact that there are a lot of people coming down the stream who will need these services,” Rowe said.
Integrated Care Communities LLC chose to build its 68-bed assisted care facility in Moreno Valley because Riverside County has a higher than normal percentage of older people, Rowe said.
Integrated Care Communities, which is under construction and expected to be completed next month, will offer monthly rates ranging from $1,150 to $2,900, about $1,000 a month less than normal, Rowe said.
“We feel like we’ve hit the market at a good time,” Rowe said of the facility, which has been five years in planning.
The biggest obstacle at the 2-year-old Marriott MapleRidge is keeping its 96 beds occupied, Bray said. The facility is only about 80% full.
“In any one market, there are only so many people who can afford this kind of care,” he said.
SENIOR HOUSING TYPES
Senior housing generally breaks down into four categories:
1. Active senior housing, which provides no medical care but has an age restriction for its tenants.
2. Assisted care facilities that tend to a person’ daily needs, like arranging meals or transportation.
3. Assisted care facilities that, in addition to helping with daily tasks, provide limited medical care, like minor nursing assistance or help with medication.
4. Convalescent home, in which tenants are generally bedridden and licensed nurses are on staff 24 hours a day.
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