| With 2009 well underway, many business sectors | | | | 2006 and 2007 timeframe," Kramer says. |
| continue to feel the stress of the economic | | | | In another bright spot, revenue growth in the third |
| downturn, including the mortgage crisis and recent | | | | quarter of 2008 still remained in the 4-5 percent |
| credit crunch. But this year's 70 Largest Providers | | | | range, he adds. If it drops to 3 percent, investors will |
| list-an annual Assisted Living Executive | | | | still see senior housing as a good defensive |
| exclusive-suggests that assisted living providers so | | | | investment compared to other real estate asset |
| far have not taken as heavy a hit. | | | | types. |
| While growth has slowed from the past few years, | | | | Additionally, while many of the major commercial |
| more than half of providers surveyed by Assisted | | | | finance companies that had been active previously |
| Living Executive still report increases in licensed | | | | are no longer active, some opportunities for financing |
| assisted living resident capacity, as of January 1, even | | | | remain available to senior housing providers, Kramer |
| if it's only due to adding one to three new buildings | | | | says. In particular, relationship-based small ($10-$20 |
| to their portfolios. | | | | million) deals through local community-based lenders |
| Modest Gains and Losses | | | | and some regional banks will continue to get made, |
| During 2008, no assisted living companies merged and | | | | and another bright spot is that Fannie Mae and |
| full-company acquisitions were rare. The only | | | | Freddie Mac have been very active as sources of |
| company to grow by acquiring sizable competitors | | | | takeout financing. REIT buyers, who still have good |
| was Five S tar Senior Living, formerly Five Star | | | | access to capital, and possibly even some private |
| Quality Care, which bought New Seasons Assisted | | | | equity entities may become active later in the year if |
| Living Communities (No. 49 on the 2008 list) and | | | | prices are low enough and values stabilize. |
| Somerford Corp. The moves helped raise Five Star | | | | Because of recent steep stock market dives, public |
| Senior Living from No. 8 to No. 6 and increased its | | | | companies may find it harder to access capital even |
| assisted living capacity by more than 45 percent. | | | | if their operations are not impacted, Monroe says. |
| However, despite a year featuring no big deals, the | | | | The turbulent market also makes it unlikely that any |
| 2009 list shows some reshuffling due to small | | | | company will go public this year, but if conditions |
| acquisitions and building. Perhaps not surprisingly, the | | | | improve, Atria remains the company to watch in that |
| biggest gains remain with the biggest players and are | | | | arena, he adds. |
| in hard numbers rather than major rank changes. | | | | Smart Growth and Caution |
| Sunrise Senior Living continues to top the list with an | | | | The credit crunch and general caution by providers |
| approximate assisted living resident capacity of | | | | brought new building starts down 70 percent |
| 32,560 units. (Actual numbers should be somewhat | | | | between the second and third quarters of 2008, and |
| higher due to construction last year but were not | | | | starts are expected to stay flat overall for the |
| available at press time.) Emeritus Senior Living and | | | | foreseeable future, Kramer says. Sunrise Senior |
| Brookdale Senior Living maintained the No. 2 and No. 3 | | | | Living, the biggest builder in recent years, has frozen |
| spots, but also continued to grow by 8 percent and | | | | 54 development projects nationwide, and Capital |
| 20 percent, respectively. Assisted living resident | | | | Senior Living Corporation has also suspended new |
| capacity increased by 20 percent at Atria Senior | | | | development. Still, new construction will raise capacity |
| Living Group (No. 5). | | | | in 2009 and 2010 as new communities that are |
| In terms of percentage growth, Senior Care Inc. | | | | already underway open. For example, Legend Senior |
| raised its assisted living capacity by nearly 44 | | | | Living did not make this year's list (currently it ranks |
| percent, a gain that moved the Louisville, | | | | No. 73 with 585 assisted living resident capacity), but |
| Kentucky-based provider from No. 17 in 2008 to No. | | | | will likely enter the list next year due to new |
| 11 this year. Senior Services of America (No. 29) | | | | development already underway, which will double its |
| grew 27 percent and moved up seven places. | | | | size. |
| Affordable assisted living provider BMA Management | | | | One sector to watch for new building is affordable |
| only moved up three spots to No. 24 but also upped | | | | assisted living, which has access to financing sources |
| its capacity by 28 percent due to new construction. | | | | not available to traditional providers such as tax |
| Mt. West Retirement Corp. changed its name to | | | | credits, nontaxable bond issues, and HUD financing, |
| Bonaventure Senior Living (No. 25) and raised its | | | | says Blair Minton, chairman and founder of BMA |
| capacity by 22 percent. | | | | Management. He adds that, in 2009, BMA has six |
| In contrast, the largest rank-changing action was in | | | | communities slated to open and expects to start |
| the bottom half of the list and did not reflect high | | | | another six to seven properties, keeping pace with a |
| actual capacity numbers since 60 percent of | | | | year-over-year capacity growth goal of at least 25 |
| providers on the list have less than 2,000 assisted | | | | percent. The company, which at the start of this |
| living residents. The biggest mover was Senior | | | | year operated 27 properties in Illinois, also plans to |
| Management Advisors (formerly Adult Care Group), | | | | expand into other Midwestern states. |
| which jumped from No. 67 to No. 51 by gaining 298 | | | | "Market rate residents who have more money have |
| new assisted living residents and a 42 percent gain in | | | | more choices and may not be choosing to move into |
| capacity. Bell Senior Living jumped 10 places from No. | | | | assisted living because they are afraid of what's |
| 46 to No. 36, thanks to 28 percent capacity growth | | | | happening to their assets," Minton says. "Our |
| or 309 new assisted living units. Erickson Retirement | | | | residents are primarily poor, so it's not affecting |
| Communities also raised its position by nine to No. 50, | | | | them. We've not seen a decrease in occupancy." |
| adding 196 units or 24 percent. Brightview Senior | | | | This year could also be a good time to buy up land |
| Living/The Shelter Group went from No. 70 to No. 62 | | | | sites at cheap prices, positioning companies with the |
| with just 149 new units and a 22 percent capacity | | | | resources to build well for the next few years when |
| increase. | | | | economic conditions should improve, Monroe says. |
| The Top 70 had only three new entrants. Grace | | | | "Unless we have 25 percent unemployment rates, I'd |
| Management leaped to No. 37 after growing almost | | | | love to be able to open properties in 2010-13," he |
| 57 percent to 1,399 residents, thanks to 10 new | | | | adds. "You're not going to have competition, the |
| management contracts in 2008. CCRC provider MBK | | | | demand will be growing, and the double kicker is that |
| Senior Living joined the list at No. 60 after more than | | | | there will be a greater demand for assisted living |
| doubling its assisted living resident capacity in 2008 to | | | | from people who deferred a move. People who are |
| 842. And Milestone Management Services (formerly | | | | now considering CCRCs will be moving to assisted |
| Our House Senior Living) entered at No. 69 with 709 | | | | living." |
| residents, a 23 percent increase from 576 reported | | | | The new year may also bring some good pricing |
| last year. | | | | opportunities for assisted living providers who wish to |
| Only six providers reported capacity losses, but | | | | grow their portfolios through acquisition and have |
| actual numbers were low, indicating again the sale of | | | | access to capital, Monroe says. Indeed, January 2009 |
| only one or two communities. The largest decrease | | | | already saw a notable big deal as Sunwest |
| was 259 residents by Kisco Senior Living, reducing its | | | | Management sold off 45 senior living communities to |
| rank by 13 spots from No. 41 in 2008 to No. 54 in | | | | a large undisclosed private equity buyer, which has |
| 2009. However, because Kisco has new projects | | | | contracted with Senior Resource Group to manage |
| under development, the company is likely to charge | | | | 41 of the properties under the name LaVida |
| back up the list in 2010. Only one company that | | | | Communities. The company maintained its long-term |
| made last year's list, Harmony Living Centers, | | | | No. 4 spot in 2009 but had a troubled year with |
| dropped off-not due to a capacity loss, but simply | | | | about 30 limited liability companies affiliated with it |
| maintaining its 2008 resident capacity of 705. In | | | | filing for Chapter 11 bankruptcy, and President Jon |
| addition to the three already-mentioned | | | | Harder also resigned in January. |
| name-changers, Oakdale Heights Management | | | | Well-financed small companies, with five to 10 |
| Company renamed itself Northstar Senior Living (No. | | | | properties, in particular, have a great chance to |
| 28). | | | | double in size due to their ability to find the small |
| Obstacles and Opportunity | | | | amount of capital needed for one-off acquisitions, |
| When the banking crisis came to a head last | | | | Monroe says. But one big player to watch for |
| September, virtually all growth activity grinded to a | | | | acquisition activity in 2009 is Emeritus. The company |
| halt due to lack of capital and uncertainty about | | | | met all its 2008 goals last year to buy up leased |
| whether cap rates reflected true property values, | | | | assets formerly operated by Summerville Senior |
| says Steve Monroe, managing editor of the Senior- | | | | Living, with which it finalized a merger in 2008, as well |
| Care Investor newsletter. The only noteworthy | | | | as picked up leases to 11 properties formerly |
| action at year end was that a major expected deal | | | | operated by Sunrise and owned by HCP Inc. in a rare |
| did not happen. In December, Health Care REIT | | | | December deal, according to Justin Hutchens, former |
| withdrew its offer to buy Arcapita Inc.'s 90 percent | | | | Emeritus COO and senior vice president. While the |
| interest in 29 Sunrise-managed properties at what | | | | company will scrutinize its spending closely due to the |
| normally would have been seen as a very aggressive | | | | shaky economy and has slowed new development, it |
| $643.5 million price. | | | | is well-positioned to grow next year in markets |
| Still, despite the rocky economy, assisted living | | | | where demand exceeds supply, Hutchens says. |
| entered this slowdown in much better shape than it | | | | Providers tempted to press the panic button would |
| did the last big recession, which coincided with | | | | do well to remember that demographic trends |
| excessive overbuilding around the year 2000, | | | | ultimately favor senior living and assisted living in the |
| according to senior housing experts. Despite concerns | | | | long term, says Karen Shayne, CEO of |
| that inability to sell homes, shrinking assets, and | | | | Nashville-based Maristone Senior Living and a veteran |
| laid-off family members who can give care at home | | | | of more than a decade of experience in long-term |
| will spur seniors to delay moves into assisted living, | | | | care. The new company has two properties under |
| occupancies trended down but not precipitously in | | | | construction and slated to open this summer and fall, |
| the third quarter of 2008, says Robert G . Kramer, | | | | but while Shayne foresees the year as "bumpy," she |
| president of the National Investment Center for the | | | | is not worried about filling units. In the metro Nashville |
| Seniors Housing & Care Industry (NIC). While | | | | market, she says she is "getting calls like crazy" from |
| fourth-quarter occupancy data was not yet available | | | | interested residents and is confident that within 18 |
| at press time, other data indicated that the most | | | | months, senior housing "will explode again. There's an |
| troubled markets, such as Florida, California, and | | | | ebb and flow to every industry, but I think by far |
| some specific metro markets-Phoenix, Las Vegas, | | | | now with the baby boomers incoming and seniors |
| Chicago, and Riverside, California-have started to | | | | becoming more sophisticated, if you have the right |
| bottom out, he adds. "Also, keep in mind that | | | | programs to present, they will come. |
| occupancy is coming down from historic highs in the | | | | |