DESIGNED FOR CARE: Senior-living communities require design that promotes well-being while being thoughtful of programming. As an asset class, senior housing is attractive to hotel investors seeking to diversify their portfolios. But experts advise that a senior-living development is not the same as a hotel and investment in senior living requires due diligence that takes into consideration community programming and caring for long-term residents in various stages of health and aging.
As an MBA student at the Glion Institute of Higher Education in Montreux, Switzerland, Sagar Shah of Philadelphia presented a thesis on developing affordable senior housing.
As managing partner of Yatra Capital Group in Philadelphia, Shah is especially interested in senior living’s middle market, where he believes demand will increase over the next decade.
Shah also is a hotelier. His company’s investment in both hotel and senior-living assets demonstrates how the spirit of hospitality and its best practices extend into other real-estate-asset groups.
Yatra Capital Group is a commercial real estate investment and management firm that owns and operates three senior-living assets in Georgia and South Carolina.
“Our involvement in senior housing started back in 2016,” Shah said. “It was sort of an accidental foray into senior housing.
“My father is a physician and one of his colleagues in the Carolinas had an opportunity that came up and he needed to pass on it, but he offered it to us. And we decided to explore the business in more detail. It ended up being a good investment for us.”
Diversifying its investment portfolio was a key factor in helping Yatra Capital weather the coronavirus crisis.
“From that point forward we never wanted our eggs in one basket,” Shah said. “Because we’re relatively diversified, that strategy did help us weather the storm last year, especially in a COVID environment where your hospitality assets aren’t generating much of anything for you.
“Most of our investment income last year came from the senior housing,” he said. “It’s a very appealing business for many, especially hoteliers.”
DEMAND RECOVERING: In its second quarter 2021 update on senior-housing investment, Moody’s Analytics reported rent prices increased year over year in all care types. It expects 2022 rents to rise in conjunction with recovering demand.
CBRE Hotels Research reported that in the second quarter of 2020, average occupancy in U.S. hotels was 28 percent. In the second quarter of this year, CBRE reported, occupancy increased an average of 98 percent compared to the year-ago quarter. But it was down 17 percent for the same quarter in 2019.
The senior-living sector had similar ups and downs.
Moody’s Analytics reports the second-quarter vacancy rate in senior-living assets was 17 percent. Pre-pandemic, the five-year average vacancy rate was 6 percent.
The senior-living assets Moody’s tracks include independent and assisted living, memory care and skilled-nursing care. Independent living has proven the most resilient with a smaller vacancy rate than the other care types.
Moody’s charted net absorption of more than 5,000 senior-living units in the second quarter.
It noted recovering demand for senior-living housing as rents increased across all the care types with assisted living seeing the strongest growth.
MIDDLE-MARKET HOUSING: The Gardens of Smyrna in metro-Atlanta is one of three senior-living communities owned and operated by Yatra Capital Group in Philadelphia. The Gardens is a memory-care home with 40 units. Rent starts at $2,300 a month, according to Care.com. Sagar Shah, managing principal at Yatra Capital, said the mid-price tier in the senior-housing sector will see prolific development and investment over the next decade.
Yatra Capital Group owns and manages a memory care home and two assisted-living residences.
Shah draws some comparison between investing in hotels and senior-living assets.
“The similarity between hospitality and senior housing is the fact that it’s not only an operating business, it’s also a real estate business,” he said.
Maintaining senior-living community buildings and homes is key to retaining and growing value in the asset.
Shah said he’s heard the growth in the U.S. senior population referred to as “the silver tsunami.”
Shah believes the real value in investing in senior-living communities will be found in the middle market, which the real-estate industry considers to be assets valued at less than $50 million. The business of providing care at an affordable price will attract demand.
“I think developers have definitely done so much overbuilding and there’s so much inventory,” he said, noting the trend in building premier boutique properties that offer little in the way of amenities and choices for residents. “I know of places in my market that have gorgeous $15 million to $25 million facilities that are lucky if they have 45 percent to 50 percent occupancy.
“Our secret sauce is quality of care, our dietary program as well as our activities. If you have those three facets of senior housing right, then I really think it puts you in a position to not only compete, but to outperform in your market.”
Shah sees senior housing evolving to include greenhouse communities, where a small number of residents live in one home. He also foresees more mixed-use complexes where residents age in place in continuing care retirement communities or CCRCs.
“Some of the larger players are also looking very carefully in appealing to that middle point,” he said. “I honestly think that that’s the future.”
Shah said continuing care retirement communities are not including skilled-nursing homes. Most developers of CCRC assets are leaving that level of senior living to health-care corporations that can absorb the costs and manage the legalities associated with advanced care.
TAKE A CUE FROM HOSPITALITY: An architectural rendering of a public space at Landmark Lifestyles, a senior-living community under development in Tupelo, Mississippi. Banko Design of Atlanta is the lead architectural interior designer for the project that incorporates the spirit of hospitality in form and function in the community that will offer independent and assisted living as well as memory care. Episode 343 of Lodging Leaders podcast is the second in a two-part series on senior living and how the sector has become part of a Venn diagram of the hospitality industry.
Senior Living Vs. Hotels
Hotel development, ownership and management is a business that transcends bricks and mortar. The same can be said of senior housing. The main difference between managing hotels and operating senior living communities is the people.
“You are responsible for human lives now,” Shah said, noting while a hotel is responsible for certain life-safety standards for employees and guests, senior housing carries greater responsibilities in serving vulnerable residents.
“Their families are entrusting you to take care of their ADLs or activities of daily living. In assisted living you are responsible to feed everybody. You’re responsible for bathing certain individuals, if they need assistance with that. And you’re also responsible for medication management.
“It’s a massive responsibility. It’s not an easy foray to go from owning and operating hotels to taking care of elderly residents. Standard operating procedures in a senior-housing setting are even more important than a hotel setting. There are a lot of areas where things can go wrong.”
The hospitality industry is struggling to recruit employees from a shallow labor pool and senior housing shares the pain.
But short-staffing at a hotel is not as an important life-safety issue as it is in senior housing. It is this part of managing senior-housing that Shah finds the most challenging.
He contrasts low staffing in housekeeping at hotel, where room attendants are tasked with 12 to 14 rooms, to a senior-living community where a caregiver is responsible for 12 to 14 lives.
“If I have a housekeeper or a front desk agent that doesn’t show up to work at the hotel we’ll still get by. Maybe we’ll work a little harder. We’ll roll up our sleeves and get things done,” Shah said. “In senior housing, your overnight shift caregiver doesn’t show, what are you stuck with? One individual or two individuals in the building to care for 40 to 50 residents. It’s that part of the business, I think keeps us up at night.”
Despite the significant differences between hotels and senior housing, Shah believes hoteliers can add the real estate asset to their portfolios as long as they understand the sector and its business model. And, just as important, have a passion for hospitality.
“I honestly feel that hoteliers – because it’s in our DNA and we live and breathe hospitality – could make an excellent transition into that business,” he said. “It’s a business that you do need to be hands-on at least with your management team and ensure that the right policies and procedures are in place.
“As stable of an investment income senior living is, all you need is one or two bad incidents and you’ll have that negative stigma associated with your facility forever. And word travels fast. It’s a very closely knit community, just like our hospitality community.”
Shah advises first-time senior living owners to turn to third-party managers. He knows of investors and developers of large-scale senior-housing projects who are partnering with local or regional operators who understand the state’s laws and standards involving senior-housing projects and services.
LIVE LONG AND PROSPER: Check out Part 1 of Lodging Leaders’ report about how senior-living is becoming a larger part of the hospitality industry’s Venn diagram. Included in the episode are the chair of Boston University School of Hospitality Administration’s Masters in Hospitality Management program, which has added a senior-living concentration, and an analyst with JLL who talks about the opportunities in seniors housing.
Design and management of senior-housing programs might take their cues from hospitality and how hotel investors can gain a foothold in an industry that’s forecasted to grow across various price tiers.
She founded the company seven years ago after plying her trade in hotels and multi-family projects. Along the way, she got involved with designing senior-living assets, where design can incorporate the practice and spirit of hospitality.
“I had worked in housing and I had gotten a little taste of senior living at a previous firm and I just fell in love with it. It was such a really great vertical to design in because it was sort of a collaboration of ideals from other verticals. It was housing; it was a lot like multi-family; there was a hospitality component to it because our residents are being hosted; and then, of course, there’s a care component.”
Great design in senior-living communities reflects the owners’ and managers’ commitment to caring for residents. Senior-housing design supports a communities’ programming, an element Banko believes is missing in many senior-living developments.
Banko established her namesake design firm to create what she believes residents are looking for in senior-living communities.
“We have built a firm on what we like to call ‘resi-mercial’ design, where it feels quite residential in quality and level of design; it feels comfortable and it feels like you’re at home. But how do we do that and also build a commercial space that needs to be able to wear and tear like a commercial space? And how do we support a program that is very care driven?”
COUNTRY-CLUB FEEL: A bar and gathering space at The Phoenix at Braselton in Hoschton, Georgia. Banko Design is the interior architectural designer of the senior-housing community that offers independent and assisted living as well as memory care. Banko Design captured a southern country-club atmosphere in creating spaces that exude hospitality in both design and programming. Melissa Banko, founder and CEO, said though her company designs with hospitality in mind, even borrowing from the hotel vertical, it’s important to keep a senior-living community’s programming goals in mind when creating common areas as well as private living quarters.
Banko Design has expanded in several other states by focusing on what Banko calls its three pillars of interior architectural design: multi-family, hospitality and senior living.
By working across the three platforms, Banko is able to get design inspiration from one vertical to the other.
But she knows what senior housing is and what it is not.
It is not multi-family projects for old people. It is not a boutique hotel experience.
Learning From Each Other
In a column Banko wrote in May for Seniors Housing Business, she said
the key to great senior living design is to balance functional and practical care with charismatic and beautiful design.
In her interview with Lodging Leaders, Banko said there are things the hotel sector can teach senior living and vice versa.
“On a master level, senior living can learn quite a bit from hospitality,” she said. “Hosting a resident and treating them much like a hotel would treat a visitor. Obviously, the difference there is that our residents are there long-term, but I think that there is a way to learn from the hospitality industry on how to really create an experience.”
Senior-living owners and managers can look to the hotel industry to learn of efficiencies in operations, from staffing to managing food and beverage to everyday tasks such as laundry.
When it comes to protecting their assets and investment, the senior-living sector should take a page from hotels’ CapEx playbook.
“Hotels actually turn over faster in cycle than seniors housing. Something senior-living operators and owners could learn from hotels is there’s a very clear plan in place of when to renovate things. With senior living, it’s a little all over the place.”
Owners of a senior-living residence might decide to upgrade FF&E or renovate when a new CCRC opens nearby. But Banko said it would protect owners’ investment and improve the quality of life for residents if senior-housing adopted a sector-wide standard renovation cycle.
On the other hand, hotels can learn from senior living how to create “durable buildings,” Banko said.
The coronavirus pandemic proved the value in designing cleanable residences.
“When the pandemic hit we had hoteliers and we had our multi-family class asking, ‘What do we do to clean our buildings better?’ ‘What kind of materials are going to be anti-microbial and what kind of materials are bleach cleanable?’
“That wasn’t a talk track before in multi-family and in hospitality,” Banko said. But now, with a focus on health care and health and wellness in general, those verticals are now learning from a vertical that was always focused on health and wellness.”
When designing senior housing complexes, whether they’re for active residents, independent or assisted living or skilled-nursing care, Banko includes a hospitality angle.
Residents are not only living in their private homes, they’re entertaining visitors and making use of the gathering places, dining areas and outdoor spaces.
But designing senior housing at any level of lifestyle and care is not the same as designing a hotel.
“A big buzz word in the senior-living space right now is, ‘Oh, it’s very hospitality-like,’ “ she said. “What does that mean? We’re fully aware and unapologetic that we’re designing housing; we’re designing someone’s residence.
“When we say that we pull inspiration from the hospitality industry, it’s really in the level of design. We’re not designing for it to look like a hotel. We want it to be the same level and the same experience that one would get in the hospitality space but, programmatically, hotels and senior living are different.”
Banko Design considers how hotels deliver on hospitality when designing for the intangibles such as a sense of arrival and positive first impressions. But design in senior living is not topical, it is integral to the community’s programming.
“You want to make sure that you’re thinking through a program,” Banko said. “The activities in the senior-living community are very different from a hotel. So it’s not just the pretties; it’s not just the finishes and the furniture and the art and accessories. Good design is good programming.”