Serving the Middle Income Consumer: Redefine Your Value Proposition for Price-Sensitive Older Adults
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Serving the Middle Income Consumer:
Redefine Your Value Proposition for
Price-Sensitive Older Adults 1
Learning Objectives
1 2 3
DEFINE the REVIEW the OFFERAlternatives &
Challenge Facts Options
2
Learning Objectives:
5 Critical Considerations for Serving the Middle Income Consumer:
1. 2. 3. 4. 5.
Industry Barriers to Entry: Policy & Operational Strategies: What is your
Demographics: How to overcome high Regulatory Changes: Managing the high Value Proposition?
How will the expenses to developing Regulations are cost of operations Quality and Price
Boomers afford what we and operating middle driving up costs
have to offer? income senior living
3
Setting the Stage
New Entrants 186 or just 19%
of the 992 newly
constructed properties
New Entrants were from operators with
to Senior Living: over 10 properties
in 2014.
From 4Q2014-4Q2017, according
65% of those properties to NIC Property Inventory data,
added were from the senior living industry added
operators that had a
992 new properties
portfolio of
to the MSAs that NIC 16% were from operators
2 or less properties
in 2014. tracked in 2014. with
3 to 10 properties
in 2014.
4
Setting the Stage
Senior Housing Construction Booming 45% of senior living product added over
the last 10 years has been developed in the
last three years.
Inventory Growth 2008-2017 | IL/AL/MC
35,000
IL AL MC 31K
30,000 28K
9,021
25,000
21K 10,110
20K
20,000
15K 2,978
15K
16K 7,971
11,994
15,000 1,616
7,450
12K
3,653
9K 10K 5,922
7,379 11,642
10,000 2,948
4,559 9,880
3,455
3,787
5,000 9,844 9,240 7,029
8,591 9,871
4,119 4,727 6,149
4,827
3,583
1,661 1,012 1,619
0 183
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: NIC MAP. Reflects inventory growth in Primary & Secondary Markets.
5
Setting the Stage
Aging Population Baby Boomer 75+ Population vs Total 75+ Population
2020-2060 (in millions)
60
• Baby boomers begin turning 75 in 2021
49
50 47
46 46
43 44
• The baby boomer 75+ population will 40
more than triple between 2025-2040 40
36
34
30
30 28
• The largest increase in the 75+ population 23
25
occurs between 2025-2030 – baby 20 18
boomers 75+ double and total 75+ 13
increases by 20% 9
10
3
0
0
2020 2025 2030 2035 2040 2045 2050 2055 2060
Source: U.S. Census Bureau Baby Boomer 75+ Total 75+
6
Setting the Stage
Demand Continues To Grow 175,000
Chicago - Needed Senior Housing Units
2,000,000
1,854,305
1,786,268
• Example of how much more new inventory 155,000 1,700,257
1,752,253 1,800,000
1,614,714
will be needed. 1,600,000
135,000 1,456,050
1,400,000
• Chicago has 84k units, and will need
115,000 1,252,991
1,180,684
1,200,000
to add 48k additional units in order 95,000
to meet demand in 2050 1,000,000
75,000
132,366 800,000
125,081 127,510
121,370
• Assumes utilization rate as of 2Q2018 for 55,000
103,937
115,263
600,000
89,442
65+ population remains constant through 35,000
84,281
2050 400,000
15,000 200,000
Source: NIC MAP and CMAP Socioeconomic Forecast
(5,000) -
2Q2018 2020 2025 2030 2035 2040 2045 2050
*Includes, IL, AL, MC, and NH care levels
# Units Population 65+
7
CONSIDERATION #1:
CONSIDERATION #1: Industry Demographics
Industry Demographics
How will the Boomers afford what we
How will the Boomers afford what we have to offer?
have to offer?
8
CONSIDERATION #1: Industry Demographics
Boomer Expectations for Senior Living
55%
Believe VALUE
(a balance of price
Value (balance of price and
quality) and quality) is most
important to Baby Boomers as they access
Price 29% senior-focused care and services.
Physical environment Perkins Eastman 2017 | The State of Senior Living Survey
“wow” factor
12%
Clark Lindsey Village | Urbana, IL
Provider’s reputation 7%
Quality 7%
Percentage who selected this item as #1
9
CONSIDERATION #1: Industry Demographics
Home & Community-Based Services
Ability to stay at home and access services (aging in
place/aging in community) 75%
Location/proximity to an urban/town center
19%
Of senior living providers
(with service, cultural, shopping, and dining options)
surveyed believe the ability
Location/proximity to nature (with opportunities for to stay at home and access
9%
walking, gardening, solitude/reflection) services is most important
to Baby Boomers as they
Intergenerational options 2%
look for supportive housing.
Age segregated options 1% Perkins Eastman 2017
The State of Senior Living Survey
Percentage who selected this item as #1
10CONSIDERATION #1: Industry Demographics
An Industry in
Transition
Yes Yes
52%
No 61% No 52% believe the traditional entry
fee CCRC is endangered
Less Not Sure Less
49%
Same
More More
Same
52% Attractive 49% Attractive
Said rental housing is
Perkins Eastman:
more attractive
2017 The State of Senior Living
11CONSIDERATION #1: Industry Demographics
Rental with à la carte services/fees
32%
Rental with access to community-based said rental with à la
28%
services carte services/fees is the
most attractive financial
Modest, non-refundable entry/community fee with model for the middle
lower monthly service packages/fees 25%
income consumer
Rental with monthly service
17% Perkins Eastman 2017
packages/fees
The State of Senior Living Survey
Percentage who selected this item as #1
12CONSIDERATION #1: Industry Demographics
Greatest Challenge Associated with Caring for Baby Boomers
Boomer lack of financial resources
58%
Individuality (one size does not fit all) 22% of senior living providers
surveyed said the lack of
Expectation for control 19% financial resources is the
biggest challenge to providing
Complex medical needs 5%
care and services to the aging
Baby Boomer generation.
Prevalence of memory care needs 2%
Perkins Eastman 2017
Diversity (social, ethnic, cultural) 0% The State of Senior Living Survey
Percentage who selected this item as #1
13CONSIDERATION #1: Industry Demographics
2018 Area Median Income (AMI) AMI Family of 4: $84,600
Chicago-Joliet-Naperville, IL HUD Metro Area
30% of AMI 50% of AMI 60% of AMI 80% of AMI 100% of AMI
Household Size
Extremely low Very Low LIHTC Max Low Median
1 Person $ 17,800 $ 29,650 $ 35,580 $ 47,400 $ 59,300
2 Person $ 20,350 $ 33,850 $ 40,620 $ 54,200 $ 67,700
Source: FY 2018 State Income Limits, HUD.gov
Affordable Moderate Market Rate
HUD or
Housing Low Income Market Rate
Public Market Rate
Choice Housing Tax w/ Medicaid
Housing w/ Private Pay
Voucher Credits Waiver
PBS
14CONSIDERATION #1: Industry Demographics
Annual Expenditure $62,880
$60,500
• Average IL rent for U.S. is $3,025 $9,432 $9,254
and $2,687 for the Midwest.
$24,200
• Average AL rent for U.S. is $4,454 $21,496
and $4,370 for the Midwest.
• Assumes independent living $53,448 $52,440
residents spend 60% of their $36,300
$32,244
income on housing and assisted
living residents spend 85% of their
income on housing.
Independent Living Assisted Living Independent Living Assisted Living
All MSAs - Annual Rent All MSAs - Annual Other Expenses
Source: National Investment Center for Seniors Housing & Care, 4Q2016
Midwest - Annual Rent Midwest - Annual Other Expenses
15CONSIDERATION #1: Industry Demographics
Current & Future Lack of Retirement Savings
When speaking to American adults about retirement, their
confidence ≠ reality 50%
of households 55+ have no retirement
Confidence: savings.1
74% expect to feel financially secure in retirement
40%
56% are confident they will reach their income goals for retirement
Reality: of the 65+ population would fall below
$136,200 amount saved by people nearing retirement poverty level without SSI. 2
$45,500 amount people say they need to meet their retirement goals
$9,150 amount their savings yields
Source: (1) Bipartisan Policy Center – Healthy Aging Begins At
Source: BlackRock Home (2) National Center for Assisted Living
16CONSIDERATION #1: Industry Demographics
Lack of Retirement Assets Per Capita Retirement and Financial Assets
(Not Including Home Equity) in 2015, Ages 62-69
The Urban Institute’s projections for BPC Commission on (in 2015 Dollars)
Retirement Security and Personal Savings paint a troubling $400,000
$337,474
picture of retirement security, especially for those in the bottom $350,000
half of the retirement asset distribution. $300,000
$250,000
• Median per capita retirement and financial assets was around $200,000
$105,000 in 2015.
$150,000
$104,974
• Median per capita retirement assets for those in the $100,000
25th percentile lack any retirement assets. $50,000 $23,882
$0
• Individuals in the 75th percentile of retirement assets have 25th Percentile Median 75th Percentile
around $338,000 in retirement and financial savings.
• 29% of households aged 55+ have neither assets in a retirement account nor a defined benefit pension.
• Over the next 20 years, nearly 40% of individuals over the age of 62 are projected to have financial assets of $25,000 or less.
» 20% of those over 62 will have $5,000 or less. Source: The Urban Institute, DYNASIM3.
17CONSIDERATION #1: Industry Demographics
Income Levels
Population Growth 85+, Income
• 15% of households 85+ fall into $35k- Between $35k - $55k 2,844
$55k.
• $35k-$55k cohort is projected to triple 2,121
from 945,000 to 2.8 million from 2017-
2050.
1,306
• 85+ growth is projected to be highest 945
between 2030-2040 at 62%.
2017 2030 2040 2050
18CONSIDERATION #2:
Barriers to Entry
How to overcome high expenses to
developing and operating middle
income senior living
19CONSIDERATION #2: Barriers to Entry
– Socrates
20CONSIDERATION #2: Barriers to Entry
Controlling Development Costs
Apartment size
Common spaces designated for amenities
Operations focus – dining options & utilities
Density of building
Location of amenities off-site
Managing interior finishes – must haves vs. would likes
– Socrates
Development team
21CONSIDERATION #2: Barriers to Entry
Aging IN Transportation Housing
Community
Aging IN place Outdoor Spaces & Social Participation
Buildings
is replaced by
an attitude about
the importance Age-Friendly
of community Communities
and a lifelong home. Community &
Health Services
Respect &
Social Inclusion
Communication & Civic Participation
Information & Employment
22CONSIDERATION #2: Barriers to Entry
Apartments for LIFE
This approach allows for residents to move
into an apartment and stay there as long as
they live. This idea is particularly appealing
to couples where one of them is more ill
then the other.
The Landsby, Elysian Residences, Stanmore, England
23CONSIDERATION #2: Barriers to Entry
Apartments for LIFE
Is there an opportunity for a new Model: Apartments for Life
It is a community that provides for aging in place and fostering of community among residents by
incorporating:
1 2 3 4
Universal design Concierge resources Facilitation of social A pricing structure that more closely
attributes that enable that support residents gatherings, and approximates the rent levels of
residents to remain in accessing off-site traditional apartment rents than typical
independent as they services independent living rents.
become frail
24CONSIDERATION #2: Barriers to Entry
25CONSIDERATION #3: Assemble the Right Team| DESIGN TEAM The Landsby Stanmore | Elysian Residences 26
CONSIDERATION #3: Policy CONSIDERATION #3: Policy
& Regulatory Changes & Regulatory Changes
Regulations are driving up costs
Regulations are driving up costs
27CONSIDERATION #3: Policy & Regulations
What can we do to level the playing field?
• Change policy
• Improve reimbursements
• Improve government communication between agencies, i.e., HUD and Dept. of Health and Human
Services, as well as local housing and finance agencies, etc.
• Improve the regulatory environment
• Evaluate building code requirements
• And creating financing incentives to entice investors to get involved.
28CONSIDERATION
CONSIDERATION #4:
#4:
CONSIDERATION
Operational #4:
Strategies
Operational
OperationalStrategies
Strategies
Managing the high costs ofofoperations
Managing
Managing the high costs ofoperations
the high costs operations
29CONSIDERATION #4: Operational Strategies
Labor • Largest expense category
• Dietary labor and raw food costs make up 18% of
Raw Food the average AL total expenses.
• Consider offering 2 entrée options instead of 4 or
5.
• Tax incentive for installing
solar panels.
Utilities • Utility cost savings of 20%
year over year.
30CONSIDERATION #4: Operational Strategies
Questions to Ask Yourself
Can we leverage what is already available in the community?
Do we need to be all things to all people?
Will Boomers really want what we have to offer?
Can we really create as much choice as Boomers will want?
How will technology change the way we create value?
31CONSIDERATION #4: Operational Strategies
Why move
to a retirement
community?
32CONSIDERATION #4: Operational Strategies
On Demand
Transportation
& Assistance
33CONSIDERATION #4: Operational Strategies
UBER-ish Like Home
Health Services
34CONSIDERATION #4: Operational Strategies
Introducing….
On-Demand Customized Experiences
35CONSIDERATION #4: Operational Strategies
Beacon Hill Village,
a member-driven organization for
Boston residents 50 and
over, provides programs and
services so members can lead
vibrant, active and healthy lives,
while living in their own homes and
neighborhoods.
Benefits include access to
discounted providers who can help
you manage your household, stay
active and healthy, and serve your
driving needs. Our social and cultural
programs are always changing
to support member interests.
36CONSIDERATION #4: Operational Strategies
Social & Cultural Programs
Cultural Arts
Join us for: the Boston Pops, Hatch Shell Concerts, Huntington Theatre, Boston
Ballet, Boston Midsummer Opera, Peabody Essex Museum and more.
Literature and Learning
Take part in: talks by local notables from academic, cultural and political
communities, our health and wellness series, mind-body connection, and
brain/memory programs too.
Social Events
Social gatherings include: informal lunches, coffees, cocktail parties, and special
interest groups (such as travel, politics and bridge).
Travel
Venture out with day trippers to: the Berkshires, Tanglewood, Newport
Mansions, Martha's Vineyard, Nantasket Beach, "Beauport" in Gloucester,
President Adam's home, the Botanical Gardens and Fenway Park.
37CONSIDERATION #4: Operational Strategies
Services
Beacon Hill Village offers a unique "one-stop shopping" approach to serving members. One call
offers easy access to high-quality preferred service providers who have been carefully vetted
by our staff. Most services are offered at a discount.
Manage your Household
Get access to: handymen, computer experts, caters, meals delivered or cooked, dog walkers,
housekeepers, home visits, plumbers, tax experts, electricians…..and the list is endless
Stay Active & Healthy
Benefit from: discounted gym membership, exercise classes, personal trainers, massage
therapists, medication reminders, home health services, geriatric care manager referrals and
more.
Get a Ride
Members get transportation to the grocery store, airport, around town or anywhere you need to
go. Doctor-prescribed escorts are available home from medical procedures.
38CONSIDERATION #5:
CONSIDERATION #4:
What is your value
Operational
Proposition?Strategies
Managing the high costs of operations
Quality & Price
39CONSIDERATION #5: Value Proposition
How will you define your Value Proposition?
Micro Urban Communities
Q u a l i t y + P r i c e = S U C C ES S
• Lifestyle
• Intergenerational connectivity
Reinvention • Attracting staff
• Continuum of care
• Connectivity
• Amenities and programs
Aging-in-Place
• Changing the experience
• LPC without walls
• Partnerships
• Staffing Models • Flexibility / Adaptability
Convergence • Apartments for Life
• Healthcare Sustainability
• Higher education • Environment
• Hospitality • Person centered
• Mixed-use • Financial
40Dana Wollschlager
PARTNER
dana.wollschlager@plantemoran.com
(847) 628-8903
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