Just like in the skilled nursing industry, every 10 years or so there seems to be a movement that predicts the end of the CCRC market (or LPC for the not-for-profits). They claim that CCRCs are a dying breed, an old-style model, and no one wants to put down $300,000 and up to $1 million and more for an entrance fee. The reality, however, is that plenty of people want to. But, of course, no one “wants” to move into skilled nursing, while a CCRC is the ultimate mix of want, lifestyle and future need.
The people who move into CCRCs are planners and looking at the long term. And long term it is, since the average length of stay surpasses anything else in seniors housing. It is not the 18 to 36 months you find in assisted living (and we may be generous on the long end). It has been eight to 12 years, although that may decrease as people moving into the independent living units (the entry point) are getting older and, we assume, a bit frailer than 20 years ago.
Perhaps the best comparison in terms of how CCRCs fared during the pandemic relative to other senior living types is to look at occupancy levels and relative declines. According to NIC MAP data, with some help from Ziegler, all 1,137 CCRCs in NIC MAP’s 99 primary and secondary markets had an average third quarter 2020 occupancy rate of 86.6%. Within that, entrance-fee CCRC occupancy was 89.0% and rental CCRC was 82.6%.
In addition, not-for-profit providers were at 88.2% while the much smaller for-profit sector was at 82.2%. As we have seen over the months, independent living, assisted living, memory care and skilled nursing have all trended much lower than the 86.6% CCRC average. And as far as the entrance-fee model being an anachronism? It has by far exceeded the performance of every other community type.
Breaking it down further, in the third quarter independent living units within a CCRC had a 90.4% occupancy rate, or 780 basis points higher than IL units not in a CCRC. Assisted living (86.1% occupancy) was 680 basis points higher within CCRCs, memory care (86.2%) was 850 basis points higher and nursing care (79.0%) was 350 basis points higher. These are dramatic numbers and certainly tell a compelling story about the strength and consumer popularity of the CCRC model. And it also helps to dispel the notion that COVID can spread in all congregate living environments. It just is not true.
The CCRC financing market is not for the faint of heart, however. In the past six months, among some of the CCRC financings completed by Ziegler have been expansions with financing at $430,000 per unit (inclusive of additional common areas, $725,000 per unit for 42 new IL units, 24 new rooms in a transitional rehab center and a new therapy facility, and the new Methodist Retirement Communities mentioned above at $556,000 per unit. Most of the expansions have been in warmer climates as many of the elderly migrate to the south.
Finally, when looking at the REIT sector and the several billion dollars of senior care divestitures in the past few years, it is interesting to note that Healthpeak Properties has sold almost all of its seniors housing and care assets, with the exception of its CCRC portfolio, which had been performing better than the other senior care sectors in its portfolio. Imagine that.