The State of Occupancy
About NIC & NIC MAP
National Investment Center for Seniors Housing & Care (NIC)
NIC is a 501(c)3 organization whose mission is to enable access and choice by providing data, analytics and connections that bring together investors and providers.
Five Star Senior Living
Five Star Senior Living Inc. is one of the nation’s leading senior living and healthcare service providers with 284 senior living communities throughout the United States.
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Metro Markets Covered
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The State of Occupancy
DEMAND FOR SENIORS HOUSING
Near and Long-Term Demographics Improving
Source: U.S. Census
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Growth in Younger Old Outstrips Other Older Cohorts in the Near Term Growth in 75-Plus Population by Select Cohorts 2017 - 2040 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
75 - 82
Source: U.S. Census
83 - 87
88-Plus
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Growth of the Typical Resident Age Cohort Peaks in 2030 Growth in 75-Plus Population by Select Cohorts 2017 - 2040
Age 83 to 87 Only
10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
83 to 87 Growth Source: U.S. Census
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Impending Caregiver Shortage Ratio of Caregivers (45-64 year olds) To Those Over 80 7 6 5 4
7:1
3 2
4:1
3:1
2030
2050
1 0
2017 Source: U.S. Census
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The State of Occupancy
SENIORS HOUSING MARKET FUNDAMENTALS
The Market Cycle Real Estate Cycles and Where Are We Today? Boom Market
Recession Phase Falling Occupancy Falling Values NO new construction 10
Expansion Phase Rising Occupancy Rising Rents Rising Values NEW Construction BUILD AND SELL
Trough
Hyper Supply Phase Declining Occupancy Falling Values RAPID Construction OVERBUILDING Saturated Market Recovery Phase Rising Occupancy Rising Rents Rising Values NO new construction BUY
Seniors Housing Occupancy Remains Sof Seniors Housing Fundamentals Primary Markets | 1Q06-3Q18
Absorption
All Occupancy
9,000
94%
8,000
92%
7,000
90%
6,000
88%
5,000
86%
4,000
84%
3,000
82%
2,000
80%
1,000
78%
0
76%
-1,000
74%
-2,000
72%
Source: NIC MAP® Data Service
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Inventory Growth Stabilized Occupancy
Assisted Living Occupancy Well Below Independent Living Occupancy Primary Markets | 1Q06 – 3Q18
IL
AL
Srs Hsg
93% 92% 91% 90%
90.2%
89% 88%
87.9%
87% 86% 85% 84% 83% 06 008 010 012 01 4 016 018 0 2 2 2 2 2 2 2 Source: NIC MAP® Data Service
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85.3%
Annual Inventory Growth Still Outpaces Annual Absorption Annual Inventory Growth Rate and Annual Absorption Primary Markets | 4Q06 - 3Q18 Independent Living
Assisted Living
Source: NIC MAP® Data Service
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Annual Inventory Growth
6% 5% 4% 3% 2% 1% 0% -1% 6% 5% 4% 3% 2% 1% 0% -1%
Seniors Housing Occupancy: 19 Markets Down, 11 Up Year Over Year Seniors Housing Occupancy by Metro Market Primary Markets | As of 3Q18
Occupancy Range (4Q05 - 3Q18) Trough Current Quarter Occupancy Year Ago Occupancy
100%
95%
90%
85%
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HOU
SA
LV
DAL
ATL
KC
CLE
ORL
PHO
CHI
TAM
DEN
DET
MIA
STL
RIV
DC
MIN
LA
SF
CIN
PHI
SEA
NY
MAP31
Source: NIC MAP® Data Service
BOS
PIT
SD
BAL
POR
SAC
75%
SJ
80%
Independent Living Occupancy: 17 Markets Down, 13 Up Year Over Year Occupancy Range (4Q05 - 3Q18) Trough Current Quarter Occupancy Year Ago Occupancy
Majority IL Occupancy by Metro Market Primary Markets | As of 3Q18 100% 95% 90% 85% 80% 75%
SA
HOU
ORL
KC
ATL
PHO
LV
MIA
RIV
TAM
DAL
CHI
CLE
DET
SF
MAP31
DEN
STL
DC
PHI
MIN
LA
SEA
SD
NY
PIT
BAL
BOS
POR
SAC
CIN
65%
SJ
70%
Source: NIC MAP® Data Service
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Assisted Living Occupancy: 20 Markets Down, 9 Up Year Over Year Occupancy Range (4Q05 - 3Q18) Trough Current Quarter Occupancy Year Ago Occupancy
Majority AL Occupancy by Metro Market Primary Markets | As of 3Q18 100% 95% 90% 85% 80% 75%
SA
HOU
DAL
DET
LV
DEN
STL
CHI
CLE
CIN
ATL
KC
DC
PHO
TAM
MAP31
MIA
ORL
MIN
PHI
RIV
LA
BOS
SEA
PIT
NY
SF
BAL
SD
POR
SAC
65%
SJ
70%
Source: NIC MAP® Data Service
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Continuous Increase In Seniors Housing Occupied Units Seniors Housing Occupied Units Primary Markets | 1Q06 – 3Q18 600,000 500,000 400,000 300,000 200,000 100,000 0
Source: NIC MAP® Data Service
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Where Did Seniors Housing Inventory Growth Occur Since 3Q17? Seniors Housing Annual Inventory Growth Primary & Secondary Markets | 3Q17 – 3Q18
Source: NIC MAP® Data Service
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Construction as a Share of Inventory Still High Seniors Housing Construction Primary Markets | 4Q05 - 3Q18
Spaces Under Construction (L) Construction as % of Inventory (R)
45,000
9%
40,000
8%
35,000 30,000 25,000
7% 6% 5% 4%
20,000 15,000
2%
10,000
1%
5,000
0%
0 Source: NIC MAP® Data Service
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3%
-1%
Independent Living Occupancy Projected to Decline Slightly Majority Independent Living Supply-Demand Forecast Primary Markets | 4Q06 - 3Q19’F 1
6%
0.99
5%
0.98
4%
0.97
3%
0.96
2%
0.95
1%
0.94
0%
0.93
0.01
92%
0.02
91%
0.03
90%
0.04
89%
0.05
88%
0.06
87%
0.07
86%
0.08
85%
0.09
84%
0.1
Source: NIC MAP® Data Service
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Occupancy area Occupancy Annual Inventory Growth (R) Forecast Annual Absorption (R)
Occupancy Rate Projected to Slip Further for Assisted Living Majority Assisted Living Supply-Demand Forecast Primary Markets | 4Q06 - 3Q19’F 1
6%
0.99
5%
0.98
4%
0.97
3%
0.96
2%
0.95
1%
0.94
0%
0.93
0.01
92%
0.02
91%
0.03
90%
0.04
89%
0.05
88%
0.06
87%
0.07
86%
0.08
85%
0.09
84%
0.1
Source: NIC MAP® Data Service
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Occupancy area Occupancy Annual Inventory Growth (R) Annual Absorption (R) Forecast
The State of Occupancy
LIFE PLAN COMMUNITIES
Life Plan Community Occupancy Flat; Near Recent High Life Plan Community Supply/Demand Primary & Secondary Markets | 1Q08 – 3Q18 2,500
2,000
Inventory Growth Absorption All Occupancy Stabilized Occupancy
94% 92% 90%
1,500 88% 1,000 86% 500
0
Source: NIC MAP® Data Service
84% 0.82
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Entrance Fee and Rental Occupancy Gap Hovering Around 3% Life Plan Community All Occupancy Primary & Secondary Markets | 1Q08 – 3Q18 94%
92%
7%
Entrance Fee
6%
91%
5%
90%
4%
89% 88%
Rental
3% Spread
2%
87%
1%
86%
0%
85%
-1%
84%
-2%
Source: NIC MAP® Data Service
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Occupancy Spread
93%
8%
Not-for-Profit Life Plan Communities Lead In Occupancy Life Plan Community All Occupancy Primary & Secondary Markets | 1Q08 – 3Q18 95%
10%
94%
9% 8%
Not-For-Profit
92%
7%
91%
6%
90%
5%
Spread
89%
4%
88%
3% For-Profit
87%
2%
18
20
16
20
20
20
20
20
14
0% 12
85% 10
1%
08
86%
Source: NIC MAP® Data Service
Occupancy Spread
93%
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Seniors Housing Existing Inventory is Old Seniors Housing Property Age (in Years) Primary Markets | 3Q18
4%
15% 41%
15% 24%
Less Than Two 2 to 10 10 to 17 17 to 25 25 Plus
Source: NIC MAPÂŽ Data Service Does not total 100% due to rounding
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The Market Cycle - Revisited
B .
A.
Euphoria Exhilaration Enthusiasm
Unease Pessimism
Optimism
Skepticism
Hope
Denial
C .
Panic Capitulation Despair
D. E.
How do you feel about where we are in the current seniors housing market cycle?
The State of Occupancy
MANAGING YOUR INTERNAL BUSINESS MIX
Internal Forces Driving Our Business We know the macro economic forces. So what can we do about it? • Segmentation (where the customer comes from) • Managing your business mix • Our websites vs. Lead aggregators • Profitability • Revenue management • People
Internal Forces Driving Our Business Managing your internal mix of customers can drive profitability
Each of these segments perform differently. • Length of Stay • Conversion Rate • Cost of Sale (Cost per move in)
Segmentation Differences - LOS Managing your internal mix of customers can drive profitability
Segmentation Differences – Conv. Rate Managing your internal mix of customers can drive profitability
Segmentation Differences – Cost Managing your internal mix of customers can drive profitability
Segment Shif Drives Profit and More…
• Own your customers • Build your online authority • Improved search rankings
• Increase conversion rates • Seller working efficiently
Lead Aggregators Can Be More Costly
Company Site
Ref #1 Ref #2
Lead Aggregators Can Be More Costly
Company Site
Ref #1 Ref #2
Segment Profitability
Segment Profitability
Professional Referrals
Revenue Management & Pricing A set of strategies that enable industries with disposable inventory to optimize revenue. SENIOR IVING 2025
Pricing Based On: • Competitive Set Prices • Occupancy Level • Individual Apartments • Service Type • Room Type
Internal Wrap Up • Knowing our own business mix – not all customers are the same. • Focus on the most profitable mix. SENIOR LIVING • Take control of2025 getting our own customers. • Don’t let anyone get between you and your customer! • Build your own site, short & long term goals • Nimble with pricing and consistent with strategy. • Nothing is going to change without good people.
Annual Same-Store Rent Growth Above 2.5% Annual Asking Rent Growth / Avg. Hourly Earnings* Primary Markets | 4Q06 – 3Q18 5% 4% 4% 3% 3% 2% 2% 1% 1% 0% 07 009 011 013 015 017 0 2 2data 2as of2 2Q18 2 2 *Wage Source: NIC MAP® Data Service, U.S. Bureau of Labor Statistics
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Assisted Living Employees Asking Rent - Assisted Living Asking Rent - Independent Living
The Good News According to a study by Argentum and Great Place to Work: • If we increase employee retention by 10% • We increase occupancy by 2% and save $4.4M annually in cost of turnover.
SENIOR 2025 Residents in LIVING permanent senior housing = 2 million. Seniors in US that are 80+ = 12.2 million, 4% of total population. 12.2 million seniors and 1/3 of them are able to afford our services.
That’s 4 million seniors. 2 Culture Shifs: • Make senior living a better place to work • Make senior living a better place to live
Questions?
Argentum 1650 King Street, Suite 602 Alexandria, VA 22314 (703) 894-1805