State of the Industry           Just back from the NIC (National Investment Center for the Seniors Housing & Care Industries) conference in Chicago. The general atmosphere among the 1400 attendees was very upbeat. With regard to the development and financing of seniors' housing properties, the industry seems to be very positive right now. And for a change, there are more buyers than sellers. Robert Reich, former US Secretary of Labor, was the keynote speaker. He emphasized that in the short term, the economy will get better, but slowly. He also said that capital for seniors' housing is and will continue to come from all over the world, not just the U.S. Assisted Living Occupancy Climbs Slowly           NIC's Key Financial Indicators for the first quarter of 2004 report that assisted living occupancy is continuing to show signs of improvement. The median occupancy rate for stabilized ALFs open 24 months or more increased to 86% during the first quarter of 2004, which is better than 85% in Q4 2003 and 83% in Q1 2003. Anthony Mullen of NIC said that average net "move-in rates" for the quarter remained below three per month for assisted living. He also said that assisted living capitalization rates held steady during the first quarter, with the average coming down from 11 to 10.9%. One transaction at 8.75% illustrated that there is both interest and competition among investors for the very best assisted living properties, which is driving down capitalization rates for the best properties in the sector. Assisted Living Quarterly Update           According to Houlihan Lokey Howard & Zukin's 1st Quarter 2004 Healthcare Quarterly Update, first quarter 2004 merger and acquisition activity appears to have slowed relative to 2003 levels, attributable to a decrease in the number of stabilized facilities on the market and to the markets taking a breather after a busy 2003. Mortgage refinancing also slowed, attributable to heavy activity last year given owner interest in locking in low rates. Loan volume placed in Q4 2003 decreased year-over-year and delinquencies increased. However, industry leaders predict that traditional lenders will become more active and the industry will see an increase in loan volume as appetite for higher yields in healthcare and seniors' housing grows. Seniors' Housing Facilities Are Maturing           The median age for all seniors' housing property types in the top 30 metropolitan areas is 19 years. According to NIC, the specifics are:

Property TypeMedian Age
Nursing Facilities (freestanding)29 years
CCRCs24 years
Independent Living (freestanding)16 years
Assisted Living (freestanding)11 years
Assisted Living (with dementia care)7 years
Dementia Care (freestanding)6 years
Congregate Care/Independent Living Sector Thrives           The congregate care/independent living sector is the healthiest sector in the seniors' housing industry and will be the first to benefit as baby boomers age, according to Integra Realty Resources' Viewpoint 2004. Data compiled by ASHA indicates an 89% average occupancy nationally, the highest of the three seniors' housing sectors. New construction continues to be slow as demand grows. Rental rate increases have been strong and should continue. Independent living operators are also facing rising liability insurance costs, but not to the degree experienced by other forms of seniors' housing. Carlyle Advances in NY           The Carlyle Group, a global private equity firm with more than $16.2 billion under management, recently purchased a Queens, NY, ALF called The Savoy at Little Neck (formerly Deepdale Hospital). The facility has 120 assisted living units and a 15-unit dementia wing. The purchase price was reported to be $25.5 million, or $188,900 per unit, and the cap rate was 10.2%. Carlyle also purchased the Huntington Terrace ALF on Long Island about a year ago and word has it that Carlyle is looking to acquire more properties in the NY Metro area. Aging Demographics           Aging American demographics will benefit the assisted living industry. As the population ages and develops more chronically debilitating conditions, the customer base for ALFs will continue to expand because people are living longer (the average life expectancy was 83 years in 2000), there are more senior citizens (35.1 million persons age 65 or older in 2000 and 40.2 million by 2010), and the number of people with disabilities is growing. Seniors' Housing Alert is a publication for distribution without charge to our clients and friends. It is not intended to provide legal advice, which can be given only after consideration of the facts of a specific situation. © 2004 Ruskin Moscou Faltischek, P.C. Most & Least Expensive ALF Rates According to the MetLife Mature Market Institute 2003, the cities, regions and states with the 10 most and least expensive average per-month rates for assisted living facilities in 2003 were:

2003's 10 Least Expensive:

RankLocalityMonthly Charge
1Jackson, MS$1,020
2Columbia, SC$1,281
3Detroit, MI$1,297
4Grand Rapids, MI$1,381
5Scranton, PA$1,444
6Phoenix, AZ$1,536
7Dell Rapids, SD$1,557
8Denver, CO$1,564
9Little Rock, AR$1,587
10Kansas City, MO$1,608

2003's 10 Most Expensive:

RankLocalityMonthly Charge
1Washington, DC$4,429
2Stamford, CT$4,073
3Statewide, AK$4,036
4Bridgewater, NJ$3,886
5New York, NY$3,830
6Highland Park, IL$3,775
7Chicago, IL$3,659
8Wilmington, DE$3,383
9Brunswick, ME$3,297
10Madison, WI$3,210

Ruskin Moscou Faltischek's
Seniors' Housing Capabilities:

  • Licensing Applications and Regulatory      Matters
  • Real Estate, Construction and Financing
  • Contract Drafting and Reviews
  • Counsel and Advice on Third Party Deals
  • Project Related Litigation Compliance Audits
  • Fostering Alliances Between Housing and      Healthcare Providers
  • Exit Strategies
  • Facility Sales and Refinancing
  • Evaluating Model Types for Developers
  • Federal and State Legislation
  • Employment Matters
  • Occupational Safety and Health      Administration (OSHA) Regulations
  • Antitrust Regulations
  • National Labor Relations Act
  • Copyrights and Trademarks
    What The Experts Are Saying "Medicare funding is a current crisis…Social Security is a crisis waiting to happen."
              -Robert Reich, former US Secretary of Labor

    "Consolidation continues, but the focus has shifted to major regionals gobbling up assets rather than the very large national firms swapping and merging."
              -Gary Lucas, SVP & Managing Director of the
              Seniors' Housing Group at Marcus & Millichap
              Real Estate Investment Brokerage Co.

    "… (T)he explosive demand for housing by an increasingly aging-but-living-longer population won't surface much before 2020. By then, the entire country will look, demographically, like Florida looks today."
              -David Schless, Pres. of The American Seniors
              Housing Association

    "We feel that on a long-term basis, seniors' housing is a very promising business, with demographics driving demand that will continue to outstrip supply."
              -Phillip Anderson, EVP & COO of CNL
              Retirement Corp.

    "Right now, the parents of baby boomers are moving into assisted living facilities. We expect the numbers to pick up again in a decade or so when the baby boomers themselves are ready for these places."
              -Tom Isles, Dir. of Suffolk County (NY)
              Planning Dept.     Please share this e-mail Alert with anyone who may have an interest or drop me a line and I'll make sure they receive their own copy. If you no longer wish to receive this communication, please send an email to info@rmfpc.com with "Remove from Seniors' Housing Group Alert email" in the subject line. Wayne L. Kaplan is a Partner at Ruskin Moscou Faltischek, P.C., one of New York's leading healthcare and business law firms, and is head of the firm's Seniors' Housing Group. Wayne was one of the founders and General Counsel of Kapson SENIOR QUARTERS Corp. and is currently Chairman of the Legal Committee and Ex-Officio member of the Board of Directors of the Empire State Association of Adult Homes & Assisted Living Facilities. He can be reached at 516-663-6553 or wkaplan@rmfpc.com.



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