Table of Experts: Senior Living

Four industry professionals recently sat down with the St. Louis Business Journal to discuss recent trends in the senior living industry. Hear what Todd Goodrich, Vice President of Business Development, had to say at the Table of Experts:

Senior living is a popular topic right now. Let’s start with what trends are changing this industry. Todd, what are you seeing in the industry regarding construction and development of senior living?

Todd Goodrich: We're still seeing a lot of activity in this market with continued development and redevelopment of properties. What gets a lot of press recently has been the construction of stand-alone assisted living and memory care buildings all over the country. We're seeing a lot of activity in that market. We're also seeing a significant amount of our revenue come from our nonprofit providers who have a more aging, established community that they need to reinvent in one way or another. It could be right-sizing their health care skilled nursing components, adding assisted living to their campus offerings, renovating or expanding their independent living options, and even updating and adding to the amenities that they provide on campus. We’re seeing a lot of activity really looking at campuses’ existing facilities and repositioning those to be more competitive in their space.

Todd, how have increasing construction costs affected the development of senior living?

Todd Goodrich: Obviously adversely. As Carmen and Kiel can attest, our nonprofit clients already operate on very slim margins just by the nature of their business and the missions that they have and the way of providing care. You couple that with rising health care costs, increasing staffing challenges, and a clientele who's almost solely on a fixed income, as well as facilities that may be past their prime or soon past their useful life. Then you add on rising construction costs that make it even more expensive to redevelop the business model or their facilities. It just makes a challenge even more challenging. There are ways to get creative to help reduce those construction costs. I think it's imperative for any provider who's looking to start a new venture like this to assemble the team: architect, builder, and a financial consultant early on in the process to avoid rework and budget issues as it gets further into the process.

Also, make sure you're really spending the money where you're going to get the most impact. Being able to creatively take a dream or a vision and break it down into bite-size phases or pieces that they can do financially helps reposition them in the market space more quickly and is certainly a good strategy. We continually look to partner with architects like Brian and our owners to invent creative ways to pre-manufacture products off-site to reduce construction costs and reduce waste. We do engage the key partners and subcontractors early on in the process so they can also anticipate the manpower needs of the projects. There's a lot of different strategies to help with that challenge for providers.

It's important for the leadership of the providers to enter into a development project with an open mind. They may have to stretch themselves and use creative thinking to solve the problem. Often times, and Brian can attest to this, the idea of tearing down an asset is difficult for people, especially a board of directors, to get their head around if they have something that's worth value. What if the skilled nursing institutional model just isn't functional from an operational perspective, a marketing perspective or amenities perspective? Sometimes you've got to think outside the box and completely reinvent the campus and not just try to continually provide updates to an existing building.

Anyone have anything else to add?

Todd Goodrich: I think this generation that is moving in now is very interested in seeing that things are being constructed wisely. Making sure that there's not a lot of waste, making sure the environmental concerns are being talked about and addressed. Almost every project we do, whether it is a resident or a board member, someone is asking what is sustainable or what green initiatives we are incorporating into the construction and design of the property. It is something that gets attention and it's genuine. It's not a generation that had a lot, so they just want to be sure that their dollars are being spent wisely for the environment, as well as for the financial well-being of the community.

What services are available for seniors who need some care assistance but want to stay in their homes instead of moving into a senior living community?

Todd Goodrich: I'll just echo something that someone else said, with the social aspects and the residents really being the deciding factor. My own mother, after doing some research, decided to move to a community where her friends were. That was the end of the discussion, she did the research to make me happy, but in the end, she had already made up her mind where she wanted to be. She's 75 so she's relatively young. Even when you start looking at some of the financial questions and implications that come with these decisions at 75, it was daunting for her to really try and line up the comparisons and truly understand the decisions that she was making. In the end, it ended up being where her friends were anyway. I thought that was interesting.

So, what does the future of senior living look like? Todd, how do you see the industry changing in the next few years?

Todd Goodrich: From the health care standpoint, it's really difficult to look into that crystal ball and understand where we are all going to be in another 10 years with changes in Medicare and Medicaid and rising health care costs. That model, it is going to change greatly. What we're seeing today is preparation for the future. We’ve seen this at Bethesda and as well as at Friendship Village. It’s trying to design as much future flexibility into the health care components of the projects that we’re developing now so they can be utilized for assisted living or skilled nursing or skilled nursing light or whatever the future may bring. And to try to make our communities as flexible as possible. A lot of what we're dealing with today are buildings that were built with an institutional model in mind 50 years ago, which makes it more costly and more difficult to reposition today and in the future.

From an independent living standpoint, independent apartments, I think if you look at our clientele today that move into communities and can take advantage of the services that are offered, it's the very top tier financially. Seniors that can afford to move into the place that has all the amenities that we talked about. At the very lower-tier of the income range, there are still some subsidies that exist to help them live their senior years. In between is a huge number, 85% of the population, that don't fit into either one of those. That's where I think the future is going. How do you start solving for the mid-market, as we call it? And in order to do that a whole new discussion needs to be had around services and creative financing and physical plant. I think that model is very, very intriguing and it's going to be a game-changer over the next decade.

With the baby boomers that are now starting to enter this market space, that percentage of the mid-market versus the high market becomes much, much larger. So, when that solution is developed, I think it'll make a huge difference in the lives of millions of seniors.

What is technology's impact on senior community design? I mean, I know that I have to help my parents understand their iPhones, so I can’t wait to hear this answer.

Todd Goodrich: People are quick to assume that seniors don't want technology, or that technology scares them. I think it’s quite the opposite. What we hear oftentimes is: “quit designing these buildings for old people, I'm going to live here,” which is refreshing that they are open to new tools. Today we have technology such as virtual reality and immersive reality, where they can literally view the apartment virtually with a set of VR goggles. You would think they'd be awfully apprehensive about it. It's different. Is it really going to have the effects? What we’re finding is it they love that technology as much as anyone does. So don't be too quick to judge.

View the full article in the St. Louis Business Journal.