By Bruce Cannon, VP/Director of Business Development at LCS and Earl Wade, VP/Senior Director of Business Development at LCS
The majority of senior living communities in the U.S. were developed in the 1980s and ‘90s. NIC data from 2016 shows 58% of properties have existed for 17+ years; many in the category are 25+ years old.
If your community falls into this category of “aging communities” and hasn’t gone through significant renovations, redevelopment or a repositioning, or doesn’t have a strategic plan in place to do so in the near future, your community runs the risk of becoming irrelevant.
The Need for Repositioning and Importance of Reinvesting in Communities
Following the 2008 recession, many senior living communities (especially not-for-profit) put the brakes on renovations or redevelopment projects. In our experience, communities that delayed renovations hindered their future sustainability and revenue generation. It’s not too late to make it a priority, develop a strategic plan and execute your repositioning strategy.
Redevelopment Dominates Senior Housing Trends
The days of building a 300-unit Life Plan Community aren’t what they used to be. New developments are high capital-intensive deals. Combine that with time to market pressures and rising land costs (especially in the northeast U.S.), and senior living communities continue to move toward redevelopment of existing campuses.
In the latest LeadingAge Zeigler 150 report of top providers, the survey shows the gap continues to widen among not-for-profit providers planning to grow through expansions or repositioning of existing communities, as opposed to adding new locations.
Repositioning or expanding existing communities is optimal when people already know who you are, and your community has a good reputation in the marketplace. There are tremendous advantages from a financial standpoint because you have base costs in place. In terms of staffing, you’re adding incremental staff as you add incremental revenue. You’re building margin and financial ratios. It fits your mission, and is manageable in the board of directors’ eyes.
Growth through satellite campuses (adding a property near a community where some services and amenities can be easily shared) is also a solid option we recommend for some senior living systems. This option is best for organizations with a strong capital base in a market that’s growing. It’s an opportunity to achieve economies of scale and leverage higher fixed costs, i.e., HR, accounting and other support areas. You can put best practices in place and capture a bigger piece of market share.
Attracting the Changing Senior Living Consumer
It’s imperative to know what seniors want, what they need, and what will sell. Our team takes great pride in the level of research we do and have access to before starting a project. Here’s one example. Additionally, my colleague Joel Bleeker, director of design for LCS Development, recently highlighted 6 senior living design trends and approaches to align with evolving desires. Determining the right repositioning and redevelopment plan sets a successful course for years to come. It can even change your resident base and result in a dramatic shift to a younger, more affluent resident.
At one community that partnered with LCS Development for master planning and redevelopment, the new residential units and amenities from the finished project resulted in buyers:
- 8 years younger than its current resident base
- Median home value and annual income were +70% higher
- Median total assets 125% higher, more than double current residents’
- +25% increase in couples vs. single/widowers
Not all repositioning projects will produce such a dramatic shift in residents, but even one-third of these results can be a revenue game changer for many senior living communities.
Multimillion Dollar Do-It-Yourself Redevelopments
That phrase alone should raise eyebrows. When you’re an existing community, your team should focus on management, not a DIY project. You’re running a multimillion dollar business, and few communities or organizations have extra employees on hand to lead an efficient and effective redevelopment. Therefore, many senior living leaders find success partnering with a development team to strategically plan and carry out a redevelopment project.
Our team at LCS Development, has stepped in after communities have tried to take on a redevelopment themselves. While it’s common for projects to encounter minor speed bumps along the way, unfortunately we’ve seen some hit a brick wall. For example, initial project steps took twice as long as anticipated, and twice as much money had been spent. We’re not saying you can’t complete a redevelopment yourself, but there is a big reputational and financial risk at stake. It’s not a risk we recommend given the influx of new senior living communities entering the market. And if your costs get high on a redevelopment project, it will put intense pressure on your pricing model down the road to make up for excess spend.
Tip: Put your best foot forward by partnering with an experienced development team to mitigate risks and manage the process.
Planning Steps to Remain Relevant and Profitable
- Start with the end goal in mind. Too often communities start with where they are rather than where they want to be.
- Once we know where we’re trying to go, we can determine how far away we are today.
- Do the homework. Analyze the market, competitors, demand and consumer desires.
- Consciously identify areas of differentiation. It’s key to remaining relevant.
- Determine external information to measure against.
- Establish a small number of metrics that matter most to your community and are critical to staying on the road to success and remaining profitable. Ensure visibility and accountability to these metrics.
If you don’t have experience carrying out redevelopment projects, our biggest recommendation is to surround yourself with people who do. Our LCS Development team will collaborate with you to ensure your project meets its goals each step of the way. We have an unblemished track record of 45 years in developing successful communities throughout the country. We plan to continue that in the decades to come.
We’re a strategic third-party redevelopment partner. We’d look forward to discussing your end goals and how we can help get you there.
About Bruce Cannon:
Bruce Cannon serves as vice president/director of business development for LCS. He has more than 25 years of senior living experience, and has helped prepare more than 100 financial feasibility studies for various types of senior housing communities. Additionally, he has been involved with the issuance of more than $1.5 billion of retirement living and long-term care financing. Prior to joining the LCS Family of Companies, Bruce was chief financial officer for CRSA Management, LLC. He has served as a member of a retirement center consulting group for one of the nation’s largest audit firms. He also served as a member on a national advisory committee for LeadingAge, and was a faculty instructor for LeadingAge’s Retirement Housing Professionals certification program. Bruce holds a bachelor’s degree in accounting from the University of Alabama.