A. All leading indicators look favorable.

Active adult housing is a growing and evolving sector within the senior housing continuum. Active adult housing targets a younger, healthy and active consumer over the age of 55 who is looking for maintenance-free living with access to amenities, activities and socialization opportunities with their peers. The average age at existing active adult developments ranges from 72 to 74 years, with some indicating a small number of residents in their 60s. This is a demographic sector that the senior housing industry has been chasing for years.

Although there is much discussion regarding how active adult housing could effectively address affordability, this product does address a wide spectrum of affordability, from low-income to middle-market to luxury, upscale products. In fact, some operators are developing multiple brands that target these different demographic groups.

Because this living arrangement is largely service-free, labor and operating costs are low, which results in a lower price point. Pricing for active adult housing is higher than traditional multifamily and lower than service-enriched independent living.

All of these factors make active adult housing attractive to all who are involved, including the lenders, investors, developers, operators and consumers. The concept, however, still is loosely defined — even current owner/operators can’t agree on what it should be called for consumers. Continued future success will require a clear and concise definition of the living arrangement and lifestyle that can be embraced and understood by future prospects.

Lynne Moore is president of MDS Research Company Inc., a national senior living and healthcare consulting firm based in Fort Worth, TX, that has been serving clients for 48 years. MDS is a two-generation company; she is following in Jim Moore’s footsteps. Moore is responsible for all MDS market research-related projects involving all aspects of senior housing and healthcare. She can be reached at (817) 731-4266 or lynnemoore@m-d-s.com.

This column appears as “You’ve Got Questions … We’ve Got Answers” in the December 2021 issue of McKnight’s Senior Living magazine.

The opinions expressed in each McKnight’s Senior Living guest column are those of the author and are not necessarily those of McKnight’s Senior Living.

Scott Tittle joined VIUM Capital as a managing director and the national lender’s first head of government relations and external affairs in September after serving as executive director of the National Center for Assisted Living since 2015. McKnight’s Senior Living caught up with him, VIUM Senior Managing Director Brendan Healy and Executive Managing Director Kassem Matt at the National Investment Center for Seniors Housing & Care Fall Conference.

Q: Could you talk about the move from NCAL to VIUM Capital?

Tittle: When I joined NCAL, my kids were young, and I gave [President and CEO] Mark [Parkinson] a five-year commitment. The five-year mark was coming  in June 2020 and I gave him 12 months’ notice. COVID changed everyone’s plans pretty dramatically. I went back to Mark and said, “I want to stay and fight the good fight, support our members, get us through whatever COVID looks like, however long that may be.” It worked out well for NCAL, which may not have been able to recruit LaShuan Bethea to be executive director in 2020, and for VIUM, which had launched in April 2020, because they had a whole year of work under their belt and time to discuss what role I could play.

Matt: We launched on April 1, 2020, right at the beginning of the pandemic. The core of the business is permanent debt capital, through HUD, Ginnie Mae, through Fannie Mae and Freddie Mac, and we have a robust bridge program. We had a very good first year, quite honestly, starting off in the pandemic. We had no balance sheet, and so we were able to look for opportunities to support our clients. But then having Scott come in a year later, after everything that NCAL had gone through and working with a lot of our clients, was really just tremendous. It was, I thought, perfectly said by Scott: to be able to let us get our feet under us but also let him continue to do what he was doing and fulfill the commitment that he had made five, six years ago. And now we have somebody who has been inside of strategic planning and reimbursement and, of course, everything that’s going on in D.C.

Q: Tell me more about your role at VIUM.

Tittle: What COVID taught us is that you can’t just be a single-resource vendor or outside support for operators anymore. COVID changed it all. It’s all about a very holistic approach, and finance is absolutely in the middle of that tenet. Finance is inextricably tied to regulation and to policy and to advocacy. And so the role I’m playing is part business development, part government relations, part external affairs.

In the government relations bucket, I am working with our senior leadership, our board, our clients, trying to advise them on what we’re seeing in Washington, what we’re seeing in the state capitals and how that’s going to impact the sector going forward. And taking a proactive role in that as well, so joining my former colleagues at all the trade associations and other governmental affairs lobby groups to help advocate for the sector and make sure operators have what they need to be successful. That’s going to be critical going forward, and so I was really honored by the opportunity to join VIUM, that they saw and agreed with the vision to see how we can best support our clients in multiple, different ways, including and especially on the advocacy side.

Q: What are the big things that you’re seeing in Washington that are affecting clients, and how are you advocating for them? 

Tittle: The No. 1 issue for everybody, of course, is staffing. Unfortunately, there’s not really a great answer on how to solve that. I thought Mark Parkinson gave a great answer at a NIC session, that it’s going to be leadership-driven, almost at the building-by-building, or operator, level.

There are some things Washington could do, ultimately, to help with the staffing crisis, such as comprehensive immigration reform, but that’s pretty difficult to do with the current political lineup. There are some things you can do with the State Department to expedite visa approvals for certain pathways to employment. There are conversations going on right now with Afghan refugees about how to include refugees in short-term and mid-term job opportunities.

Those are interesting discussions, but when you look at what operators are doing to help become the employer of choice in the market, that’s going to raise all boats. It’s amazing some of the things that our clients are doing to attract and retain employees. Everyone has a brand new cell phone, and they’re fully funded on their cell phone plans. They’re doing rent allocations with local apartment units. A 100% attendance bonus. They’re doing all these things to reach out and become an employer of choice across all markets and sectors in some localities. Once that happens, everyone’s going to have to rise up and do the same thing. So I think that ultimately might be how we help stabilize staffing.

Stepping back from that, certainly whatever happens with the next round of Provider Relief Funding, that’s critically important. That’s what saved the sector through the last year and a half. And so making sure that Phase 4 goes out in a fairly seamless way, whatever the formula looks like, that’s going to be pretty important.

Post-COVID, if we look on the senior housing side, certainly all the actions likely are going to be at the state level — how states are going to respond to what senior housing went through during COVID and what regulatory practices might be needed in place going forward. And that includes not only finding productive regulatory practices, but also making sure that states don’t overreact and take some aggressive steps to then actually hamper growth and opportunities for the sector.

And lastly, all the state and local funding that came through in the last stimulus package. There’s $200 billion to $300 billion out there that states are holding on to. And you see what happened in Texas and what happened in Pennsylvania, where they were actually able to pull those dollars down to benefit the sector. Senior housing should certainly be part and parcel of that conversation. So working with state affiliate chapters to make sure those dollars flow through to long-term care operators. Those are a couple of things we’re watching right now.

Healy: On top of that, with the political climate in each state, and all the M&A activity going on, it’s really critical for these buyers and people who are looking at opportunities to expand into a new market they hadn’t been in to understand not just, this is what the Medicaid structure looks like right now, but what’s the political climate? Is it going to change? Do we have to be aware of, maybe we’re going from a cost-based system to something else, and that could totally change our projections for what this facility is going to look like after we acquire it? There are so many facilities changing hands right now and so many players going from one state to a new state they’ve never been in before. Scott’s involvement and knowledge with the different state associations and political climate in each of those states will be really important to not just on our own underwriting of deals but advising clients on what to be aware of as they’re going to new markets.

Q: What is the climate like right now for M&A?

Tittle: What I’m hearing is, there’s more deal activity conversations going on right now than we’ve heard at past conferences. I think that’s really a level of optimism people are seeing for the future of the sector, because people are starting to come out of COVID and see what’s possible. We see the demographic change happening. The baby boomers will hit their low 80s in 2025. It’s going to be an incredible time to be part of the sector.

Matt: The M&A activity that we’ve seen in the last 90 days, quite honestly, is just the tip of the iceberg. I think we’re going to continue to move forward and continue to see more and more. You’re coming out of the pandemic. They’ve made their way through it, and now you’re looking forward to an already-evolving industry pre-COVID. Post COVID, what’s it going to look like? You’re going to see assets start to change.

And the other side of it — there’s still a lot of capital on the sidelines. A lot of capital will be looking to invest into this space. And so that capital that’s sitting there at low returns or no returns needs to be invested, and that’s where you’re starting to see that opportunity starting to drive up pricing.

Healy: On the skilled nursing provider side, so many people in the last 12 to 18 months, everyone has at least sat back and thought, ‘Are there one or two facilities we should be divesting? Or maybe our whole portfolio? Do we need to exit the space?’ Everyone’s having those internal conversations. And the per-bed values that skilled nursing facilities are trading at in most states are almost above 2019 stabilized levels in a lot of cases. So you have a provider that’s saying, ‘It’s been a really tough year. Do I want to keep going, or do I want to capitalize on these incredibly high values that these facilities are selling for and not have to get my performance back to that level to be able to do it?’ And I think a lot of people are saying, ‘OK, let’s take a few chips off the table and reinvest in our organization.’ Or some are saying, ‘I’m exhausted. I need to get out.’ And then others are saying, ‘I’m ready to double down. I’m going to look for opportunities to grow my organization, scale up and get economies of scale that way.’ So it’s been interesting. You have to at least think about it and consider it based on the values we’re seeing in some of these transactions.

On the seniors housing side, there also has been a ton of activity. The premiums that we’re seeing and the sales that are occurring are a little higher in skilled nursing than they have been in seniors [housing]. I think part of that is just that when a seniors [housing] building is at 70%, 60% occupancy, cashflows, in many cases, are negative or cannot meet debt service obligations, whereas if a skilled nursing building is down into the 70s and 60s, because they’re selling at a 13 or 12 cap rate, there’s still some cashflow there that supports [until] debt services are stabilized. So I think people have been more willing to be aggressive with those purchases, knowing that they’re not going to be losing money coming out of the gate as they stabilize those buildings.

Q: What is VIUM seeing right now as far as the capital needs in the industry?

Matt: We’re doing a lot of acquisition financing and that, quite frankly, is driving a lot of the volume that we’re seeing and a lot of construction. And rehab is definitely a need. The question is, how are they going to reinvest? Where are they reinvesting? What type of facility ultimately is going to lead us into the future, and how do we pay for it? That, I think, is still a couple of years down the road. There is very, very little new construction, if any at all. The vast majority of what we’re doing is acquisition recapitalizations.

Healy: I met with a number of architects while I was here this week, [asking them] what are you seeing? Are you having conversations? Are clients starting to talk about projects? More importantly, are a lot of clients looking to reposition older assets that they’ve had for a period of time? And they said, ‘We’ve had tons of conversations.’ There’s a lot of that going on. We haven’t seen it on the financing side yet, but strategic discussions are starting to happen — what have we learned in the last 18 months? What can we do based on the footprint of our acreage on our site and the way the building’s laid out? Those conversations will continue to happen. I think we’ll see a lot of renovations and rehabs of existing buildings starting more toward the end of 2022 and then into 2023.

Tittle: A real opportunity on the advocacy side will be … the ‘human infrastructure’ bill. I think you’ll see a lot of priorities from the trade association in there on the capital side for both skilled and assisted living, which would include HVAC systems, safe visitation rooms, new technology for remote visitation and remote visits, marketing, one-time capital upgrades for physical plant remodeling, like looking at older properties that are three and four beds and moving them down to two and single-unit occupancy. And then conversations about [making] a significant investment in the capital needs for the future of the sector, to prepare for that wave coming.

And then, if you look historically at the midterm elections, the party that’s in the White House historically loses 40 seats in the House in the first midterm election. …So, depending on what happens with the infrastructure bill, that could impact … the 2022 midterm election.

Q: If Republicans win all of those House seats, what do you think that means for the industry?

Tittle: It’s an interesting time, because what we’ve always said about political life in D.C. is that we like a balanced government in D.C., because then you have someone to negotiate with. When the Democrats control everything and they have majorities high enough to be able to push through some of their priorities, there tends to be a larger role on the regulation side. But when the Republicans control everything, entitlement spending is absolutely on the table for cuts. And when we look at the challenges to the Medicaid program when Republicans had everything in their control and Paul Ryan wanted to cut Medicaid by 20% over 10 years — that would have been devastating to the sector. So we like balanced government in D.C., someone to negotiate with.

I think it’ll really depend on what November 2022 looks like after that and if they are super majorities or slight majorities. And then, really, who is running for president the next two years.

The common question for senior living certainly is, is there going to be conversation about regulating assisted living federally? And I just think that the capacity just isn’t there right now with everything else going on in Washington. That would be a huge, enormous lift to create some equivalent of OBRA ’87 [​​Omnibus Budget Reconciliation Act] on the skilled side for assisted living. It would take multiple years and lots of machinations.

So I think for right now, there’s not that threat out there, but that doesn’t mean that there aren’t some looks at it. Sen. Elizabeth Warren has always been focused on assisted living. So you could see some more data requests to the sector, some hearings, maybe, at some point post-COVID. So our radar is certainly up. We’re going to make sure that we have responses and answers, but states are absolutely the best incubators for the sector moving forward, for them to be able to respond more nimbly to the assisted living needs state by state. When you look at it, it took Congress 10 years to update the requirements of participation for skilled nursing providers. That’s just not the answer for assisted living.

This interview has been edited for length and clarity. An abridged version of this interview appeared in the December print issue of McKnight’s Senior Living.

Bruce Springsteen once asked, “Does this bus stop at 82nd Street?” The song was about New York, but it also applies to Lawrence, MA, home to the Mary Immaculate Health/Care Services and its innovative new memory care unit. 

The Bus Stop has become a popular meeting place for cognitively challenged residents, and even though the bus never comes, the stop has an important purpose, says Rebecca Alfonso, program director for memory care.

“It’s a popular people-watching spot, like a porch,” she says. “It also serves as a place for reminiscing, like, ‘What bus number did you take to work?’ After a while, it becomes a natural way to say, ‘Let’s go get a drink while we wait.’”

The “bus stop” is one component of a design theme that follows the Alzheimer’s Association Habilitation Therapy Program, which creates a world patterned after residents’ earlier lives. The $500,000 project features similar elements such as a meeting tree, post office, memory garden and quiet room.

The 41-unit memory care center is part of a comprehensive eldercare campus.The project took about two years to complete, MIHCS CEO Jeanne Leydon says.

“We did a lot of the work ourselves,” she says. “We had volunteers to paint, build closets and shelving.”

Leydon credits retired Maintenance Director John Raymond with creative vision on elements such as the “back porch.” Residents can sit on a couch or in glider chairs to view a landscape mural beyond a handmade porch railing. 

Aesthetic and functional details are paramount in the décor, designed to enable “wayfinding” for residents, whereas furnishing materials promote safety. Three neighborhood styles are based on resident demographics and area history — stucco represents the Latinx population, clapboard represents the working class and brick is reminiscent of the town’s factory past.

Each neighborhood is designed in a specific color that assists residents in navigating their way back “home.” Light fixtures, color-coded doors and mail slots are part of each resident’s entrance, for instant recognition. Flooring is tactile, skid-resistant and has a cushioned underlayer to prevent injuries.

As a dementia specialist, Alfonso carefully researched the environmental aspects of the design to create “a positive and relaxed” atmosphere. Working with a design committee, she and the group determined which materials offered the most resident protection.

The center’s holistic approach is a radical departure from conventional methods, Leydon says.

Lessons learned

1. The Alzheimer’s Association Habilitation Therapy Program is a progressive method for creating a safe and comforting environment for cognitively challenged residents.
2. Using volunteers for tasks such as painting and carpentry is an effective way to save money.
3. Safe materials such as tactile, cushioned flooring are worth the extra expense, to ensure resident safety.

The firm conducted interviews this spring with the leaders of 13 organizations in the seniors housing sector, including prominent real estate investment trusts, private owners, operators, developers, real estate private equity firms and industry trade associations. Technology was widely discussed as an area for improvement and a way to gain needed efficiencies. 

Interviewees acknowledged, however, that improvements require investments in time and money, both of which are hard to come by right now. Amid the pandemic, many operators were forced to invest in resident and family-facing services and public health technologies to survive. 

Now, the focus must turn to technologies that ultimately can help affect long-term cost as well as free up staff time. 

“The pandemic caused the digital evolution to accelerate,” one interviewee said. “However, while we made many investments in ‘front of the house’ resident-facing technologies, little time and money has been spent on ‘back of the house’ technology investments that focus on improved efficiencies.”

The report also focused on the need to further explore efficiency and decision-making driven specifically by data and analytics, something the senior living and skilled nursing sectors are behind on, compared with many other industries.

Not all 2021 McKnight’s Excellence in Technology Awards winners were recognized for programs and applications directly related to COVID-19, but it was hard to escape the impact of the pandemic and the effects it had, both good and bad, on the provider community.

As a national judging panel discovered, senior living, skilled nursing and home care operators magnified efforts regarding communication among staff members and families, information-gathering and services and care. They often did so in ways that might not have arrived as quickly without COVID-19. As usual, the annual awards competition shined a bright light on the resilience and resourcefulness of the long-term care industry.

“Congratulations to this year’s Tech Awards winners. These are the operators who are setting the pace,” McKnight’s Editorial Director John O’Connor said. “We received some of the best entries ever.”

Submissions came from dozens of states as well as Canada. Each entrant was judged by at least three preliminary reviewers. Subsequent judging rounds narrowed the field. Often, fractions of a point separated winners from other finalists. Each, however, made useful application of some tool(s) or system to improve overall outcomes of their resident populations.

“This year’s entries reflect the growing role of technology in our sector,” O’Connor reflected. “Operators are harnessing tech tools as never before to improve care, unearth new efficiencies and improve operations.”

The 2021 McKnight’s Tech Awards winners were announced during an Oct. 20 online ceremony that highlighted all finalists and included acceptance speeches by each of the 12 Gold award winners. Winners, finalists and program sponsors Medline, iN2L, SimplyConnect and Consensus Cloud Solutions also were recognized in observances at the American Health Care Association / National Center for Assisted Living Convention & Expo in National Harbor, MD, and at a reception coinciding with the LeadingAge Annual Meeting & Expo in Atlanta.

Among award winners across all tracks — Senior Living, Skilled Nursing and Home Care — Atria Senior Living won Best in Show for its Resident & Family app it created.

A breakdown of the 2021 winners in the Senior Living track is posted here. Visit mcknights.com to read about Skilled Nursing track winners and mcknightshomecare.com to read about Home Care track winners.

To watch the online awards presentation and recordings of the Summit webinars, visit mcknights.com/techawards2021; free registration is required.