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「The Continuing Care Retirement Communities (CCRCs) Market: A Primer」

 

「The Continuing Care Retirement Communities (CCRCs) Market: A Primer」

By: Rapid Access International, Inc. April 2020

What are Continuing Care Retirement Communities (CCRCs)?

There are several property types for seniors housing in the United States that focus on a combination of quality housing and services to seniors. The primary property types include: 1) independent living (IL); 2) assisted living (AL), which includes memory care (MC); and 3) nursing care (NC).1 Each are differentiated by the care and services they provide to seniors.

Independent living properties exist on their own in freestanding campus types, as well as in combined campuses that include a separate campus for assisted living. Continuing Care Retirement Communities (CCRCs) are differentiated by their inclusion of at least two campus types - one of which being nursing care. Although, CCRC often include all three of the primary property types, including a campus for nursing care. CCRCs are also often referred to as life plan communities (LPC) and, as noted below, “seniors housing and care properties”.

Keeping abreast of Market Data relating to Seniors Housing & Care Properties, including CCRCs

A great reference source for market data on this topic is the NIC Investment Guide: Investing in Seniors Housing & Care Properties, currently available in its fifth edition.2 The Guide, published by the National Investment Center for Seniors Housing & Care (NIC), currently contains market data as of the end of 2017. The Guide is published every two years, with the next edition forthcoming. Any future editions can be expected to be published and made available at the same location referenced in this article. We have referenced the Executive Summary of the Guide for this report. The full version is available for purchase on the NIC website (USD$50 for PDF edition; USD$100 for Print edition).

This report differentiates between the terms “seniors housing” and “seniors housing and care properties. “Seniors housing” excludes nursing care properties and 55+ seniors apartments, whereas the term “seniors housing and care properties” includes all of the properties providing the care segments outlined previously but not 55+ seniors apartments.

While the report is a helpful resource for this market data, it is important to note that it is prepared to illustrate the market for “investment grade” seniors housing and care properties in the United States. In other words, the data includes age-restricted properties with at least 25 units/beds that charge market rates for housing and services offered. The report estimates do not include many smaller “board and care” properties, ‘which are not considered for purchase by the typical institutional investor yet serve a sizable population of seniors’.

That being said, it is estimated that around 2,000 CCRCs/LPCs exist in the United States.3 This figure compares very closely with the NIC figure that is limited by investment-grade properties. It should be noted that investment-grade does not necessarily relate to for-profit equity investment communities. Approximately 80 percent of CCRCs/LPCs are in fact owned by not-for-profit organizations.4 But, even not-for-profit organizations issue investable debt.

A great deal of CCRC/LPC market data relating to not-for-profit organizations is freely available in the LeadingAge Ziegler 200 report. The latest 2019 edition and previous editions are listed on the Leading Age Website.5 The LeadingAge Ziegler 200 [LZ 200] (Formerly 150) lists the largest nonprofit systems providing aging services through senior living in the United States, by order of their total owned market-rate units.

In the 2019 LeadingAge Ziegler 200 report, 691 nonprofit Life Plan Communities within the top 200 communities are identified: On slide 4-2b, the report provides a Summary of Community Mix (by Largest 10, 25, 50, 100, 150, & Total):6

rai-20204-1

Beyond these figures, the LeadingAge Ziegler 200 report lists each of the top 200 communities.

Market for Investment Grade Seniors Housing and Care Properties (CCRC/LPC) in the U.S.

In the U.S., there currently are approximately 23,500 investment grade seniors housing and care properties containing 3 million units.7 The total value of this investment-grade seniors housing and care property market is estimated at $409 billion (assuming a $181,000 price per unit for seniors housing properties and an $84,000 price per bed for nursing care properties).8

The report provides further detail on the supply of these investment-grade properties in as follows:9

rai-20204-2

In a separate article published by NIC, it was noted that occupancy was flat in Q42017, with current CCRC/LPC occupancy at 91.1%.10

A listing of the 1 largest CCRC/Life Plan Community Operators is also provided in the report as follows:11

rai-20204-3

Emerging Trends and Observations

The NIC Investment Guide focuses on Emerging Trends and Observations in Section 2 of its Executive Summary document. The observations and trends fall into five broad areas: supply and demand, operating strategies, capital markets, the labor market, and regulation. Some of the key points include the following:

Supply & Demand:

●High construction activity has led to supply that has outpaced demand in some markets. This has led to some downward pressure on occupancy.

●Issue of Affordability: While the majority of new construction activity has been focused on private-pay, market-rate projects, some developers and operators have been innovating to address demand for more affordable seniors housing.

Operating Strategies:

●Growth of Provider Partnerships. Seniors housing and nursing care operators are identifying ways to partner with acute care hospitals, managed care companies, and other health care providers.

●Technology Innovations. Several examples are provided, including IT systems and big data are allowing senior management to observe real-time changes in their day-to-day performance and operations, and remote monitoring of residents is generating staff efficiencies

In a more recent update, NIC senior principal Lana Peck has outlined the latest CCRC Market Trends as of 3Q 2019:12

Key Takeaways

  • CCRC occupancy has remained steady around 91% since the end of 2014.
  • Rental occupancy is at an all-time low while entrance fee occupancy is at a recent high (89.1% vs. 92.6%).
  • The occupancy gap between entrance fee and rental CCRCs is near the widest since NIC began collecting the data but has narrowed slightly from 3.4% in the prior quarter to 3.2%, currently.
  • Overall, CCRC construction activity is down from a time series peak reached in 1Q 2018 (3.1% of existing inventory to 2.6%) primarily due to moderating construction of rental community units.
  • Five markets represent more than one-third (36%) of the CCRC units currently under construction: Dallas, San Diego, Charlotte, Phoenix and Washington, DC.
  • CCRC year-over-year, same store asking rent growth in the third quarter of 2019 was 3.9%, down from the time series high of 4.6% reached in the first quarter of 2019.

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