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December 7-December 20, 2016 — COLORADO REAL ESTATE JOURNAL — Page 39
Camille M. Burke
Despite reports that senior liv-
ing development is coming close
to the point of reaching maximum
penetration, we believe that there
are still markets ripe for new devel-
opment in
Colorado.
Mar-
kets that
appear at
first glance
to have
adequate
inventory
may be
filled with
buildings
that are
subpar or
“tired.”
Similarly,
there may
be opera-
tors that have a more traditional or
institutional way of thinking and a
paternalistic approach to services
and support.
What these old buildings and old
mindsets create are markets where
people steadfastly resist leaving
their homes. Through innovative
design and operating cultures, we
can expand the current prospect
pool and encourage people to move
to senior living settings sooner. The
big threat that exists, in my mind,
is to those competitors that haven’t
updated their buildings or their
approach to services and care. If
these communities aren’t reinvest-
ing in creating a fresh product, they
end up struggling to build occupan-
cy and retain team members when
new competition enters the market.
Other opportunities include
the development of a midmarket
assisted living product, one with
a more moderate price point that
can serve those who are currently
unable to afford assisted living.
Those who can make this model
work financially, through more
modest amenities and services, will
be “golden.”
In addition, opportunities remain
for “55 and better” residential
apartment home dwellings. Rather
than focusing on luxury and full-
service amenities, these communi-
ties offer an affordable option with
services provided through commu-
nity partnerships.
Michael K. Schonbrun
In the short term, overbuilding in
Colorado’s major market is a signif-
icant threat to the senior housing
industry in Colorado. While much
attention has been paid to the
imminent arrival of the baby boom-
ers, the senior housing industry
and their financial backers need to
remember that the first wave of the
boomer generation won’t be enter-
ing senior housing in any meaning-
ful way for at least another 10 years
when they start turning 80.
The recent surge in build-
ing assisted living communities,
spurred by the increased flow of
equity capital into the field, already
has pro-
duced a
drop in
occupancy
levels in
the aver-
age assist-
ed living
communi-
ty nation-
wide.
The Front
Range of
Colorado
is show-
ing similar
results.
The risk
here is not only to these new build-
ings now coming on line but also to
the future supply of capital to the
field because slower-than-predicted
fill-up rates could well dampen the
enthusiasm of capital to enter or
remain in the field.
A second threat will be the short-
age of qualified personnel – not
only at the senior and midmanage-
ment levels but also at the direct
care and service level. An increas-
ingly demanding clientele as the
industry turns its focus to members
of the silent generation and in the
next decade to the boomers – far
more demanding than their older
siblings in the World War II genera-
tion – will stress the capabilities of
the current level of general manag-
ers already in the field, who are not
accustomed to such a demanding
clientele. Possible changes in immi-
gration policies would exacerbate
the problem of finding front-line
staff.
Attention will have to be paid to
luring executives from other fields
where there is experience in man-
aging culinary, housekeeping and
concierge services. Needing to deal
with the not insignificant health
care needs of their clientele could
further reduce the number of com-
petent managers willing and able
to enter the field and learn new
skills, even those individuals com-
ing from the hotel world. At the
entry level of management, senior
housing has yet to attract much
attention of the millennials. Recent
signs of emerging interest in uni-
versities among such noted hotel
and restaurant schools as those at
Cornell and University of Denver
is an encouraging sign. Those uni-
versities and training programs will
need to get busy to meet the needs
of the boomers when they do start
to arrive 10 years from now.
Lynne Katzmann
Industry fundamentals are
changing and that means both
new opportunity and obstacles to
overcome. For 2017, I am concerned
that the obstacles may outnumber
the immediate opportunities.
Next year, I expect significant
pressure on both the revenue and
expense sides of our business. New
building openings will likely impact
both sides of the equation in 2017.
Despite the rosy picture that
some industry sources continue
to paint,
many of us
are seeing
new com-
munities
open both
in primary
and, more
recently,
secondary
markets.
Several
remain
either in
develop-
ment or
construc-
tion. Short
term, both new and long-term
operators are likely to see greater
challenge in occupancy. In addition,
new communities need staff – com-
petition in this arena too is already
impacting overtime, turnover and
wage levels. On the latter point,
consider these new, frankly very
impactful, facts: Unemployment is
as low as the last cyclical bottom in
2008, 4.9 percent nationwide, and
wages increased an average of 2.8
percent over the last year.
I also am concerned that the
paradigm shift to value-based care
wrought by the Affordable Care
Act together with changing con-
sumer preferences will dictate that
we shift or perhaps even reinvent
our product much as we did with
the advent of assisted living in the
mid-‘90s. But this is also the oppor-
tunity! It will mean that those who
can design, develop and construct a
product that addresses new needs
can in fact be very successful. In
my mind, this product will be a
larger residential-type unit with
universal design whose location
will afford residents an opportunity
for continued integration in the
larger community, not only access
to health and other services, but
also to maintain social connected-
ness, a key to healthy, good living.
And those who can assure that
provision of services to those who
need them and coordinate them
will lead the pack!
Matt Turner
Colorado has seen a tremendous
amount of new activity in the
senior housing space over the past
several years. There is no obvious
market area along the Front Range
that hasn’t
seen some
amount of
new senior
living con-
struction,
and many
areas have
seen mul-
tiple proj-
ects of var-
ious types.
Many fac-
tors have
driven
this,
including
(among
others) a stable and growing state
economy, significant population
growth, liquidity and increas-
ing prices in the housing market,
strong rates for senior housing
projects and relatively low barriers
to entry for developers.
In general, this new supply, if
designed, capitalized and oper-
ated well, is great for residents and
families. It creates optionality of
design, quality, services and price
point, and it ultimately results in
a better-educated consumer. How-
ever, some areas could be passing
the tipping point of saturation. The
amount of new supply in primary
markets is creating downward
pressure on rates, and new com-
munities are, in some cases, filling
very slowly and at lower rates than
forecast.
Oversupply, coupled with quickly
increasing wages, impacts from
labor law changes and a statewide
unemployment rate hovering just
over 3 percent likely will have a
huge impact on the viability of
new supply coming into certain
areas at this late stage in the
Colorado senior housing develop-
ment cycle. For our platform, the
near-term opportunity is to man-
age growing operating expenses
while we continue innovating and
improving ways to care for and
engage our residents.s
Health Care & Senior Housing Spotlight
Camille M. Burke
President,
Cappella Living Solutions
Michael K. Schonbrun
CEO and founder,
Balfour Senior Living
Lynne Katzmann
Founder and CEO,
Juniper Communities
Matt Turner
Managing partner,
MorningStar Senior Living
The coming
year promises
many challeng-
es and oppor-
tunities, from a
shifting politi-
cal environ-
ment, to many
new properties
entering the
market, to
labor challeng-
es and shift-
ing consumer
preferences. We
appreciate our panelists’ willing-
ness to share their direction and
focus for 2017 and beyond
MODERATOR COMMENTS
Elisabeth Borden
The Highland
Group Inc.
www.thehighland
I also am concerned that
the paradigm shift to value-
based care wrought by
the Affordable Care Act
together with changing
consumer preferences
will dictate that we shift or
perhaps even reinvent our
product much as we did
with the advent of assisted
living in the mid-‘90s.