Description:  Demographics, regulatory changes, and a pandemic have accelerated the arrival of the new future in senior housing. Listen to what Lloyd Jones Senior Living leaders see as the bifurcation of traditional senior housing into AL | MC luxury healthcare and the resort model for retiring boomers ages 75-85. The team also discusses how distressed REITs and abandoned hospitality projects are prime assets for smart senior housing investors.

Tod Petty:
Hello. My name is Tod Petty and welcome to the Senior Housing Unfiltered podcast. Today is December 16th, 2020. You don’t want to miss this show. Jimmy and I will share the industry shifts coming to senior housing and how it affects our future. Don’t go away. We’ll be right with you.

Jimmy C.:
We have a great show today, Tod. You want to tell us a little bit about it? It’s a little different.

Tod Petty:
It is. And with your intro music, the new intro music, we have to really perform now for our audience.

Jimmy C.:
Well, we’re really pumped here in the office now.

Tod Petty:
That’s a great introduction. Well, we absolutely have something really special today. We prepared, in the last couple of weeks, to do a podcast that we’re now going to do in January of the new year called the Leader’s Greatest Gift. And you don’t want to miss this podcast in January because we’re going to talk about what do followers need?

Followers need passionate leaders and followers need committed leaders. And without that combination, that elixir, we’re going to come up short every time. So I’m going to pause that because we’re going to do that next month. And today we’re going to have something different. We’re going to share with them a presentation we did a couple of weeks ago that will change and prepare them for 2021.

Jimmy C.:
Yeah, absolutely, Tod. And we had the pleasure to join Chris Meyer and this Construction Coffee Club sponsored by Cooper Construction. It’s an exclusive breakfast club that we had the pleasure to join. And we shortened up the audio a little bit. We don’t want to bore you guys with too much, but this is very, very good information and we think that you guys are going to benefit from it.

Tod Petty:
Yes, it’s probably about 15 minutes. We’re going to talk about a money pyramid. We’re going to talk about demographics. We’re going to talk about regulatory changes. We’re going to talk about this pandemic and how all of these combined have accelerated the arrival of a new future in senior housing. We’re going to talk, lastly, about a bifurcation of assisted living memory care model we’re calling luxury resort. And then we’re going to talk about an independent living model to meet the needs of a new generation that’s going to want one last bite at the apple.

Jimmy C.:
Yeah, absolutely. You’re going to hear a lot of good things. So enjoy.

Tod Petty:
Yeah. We’ll be back with you after the presentation. Stay tuned.

This is a real neat board called the money pyramid. I don’t know if you can see it or not, but I’ll, I’ll try to go over it so you can hear in the back. So the money pyramid has not changed since 1940, and the social security administration has been tracking income since then. And no matter who’s in power, no matter what plans we have, no matter what stimuluses we have, this thing never changes. And it’s really interesting. So, if you can see this, 20% of the population is broke. 60%, will live in a lifetime financial struggle. We do have good news. It’s coming.

That’s 80% of our population. And at the top 20%, 15% make a good living, 4% are prosperous and 1% are rich. This never changes, no matter what happens. It may change in the future, but it hasn’t in the last 40 to 50 years. So, what this shares with us is that we need to be talking to the top 5% to find out what that they’re doing to be prosperous. And that’s hard to find, except I would say this is probably a room full of people that are passionate and committed, or you wouldn’t be here this early this morning at Chris’s great show, wherever he’s at. So the other way of looking at this is that we need to be wary if we can’t get to this 5%, we need to be wary of 95% of the information we’re receiving because the majority is wrong.

And so as you’ve sat over the last year and listened to Zoom and podcasts, I would challenge you to be very discreet about what you’re hearing. Because first of all, we know that a lot of people had nothing to do, so they all decided to have a podcast. We all decided to have a Zoom conference. And I can’t tell you how many people we’ve spoken with that, it’s been beneficial at times, but a lot of it is just regurgitated information. So I’m going to try to share something new with you today. And you can determine where I fall in this pyramid as far as valuable information. So, thank you.

So the senior housing industry. To share just a little bit of background, I’ve been in the industry 20 years and I’ve been involved in 50 projects. So, for the first 15 years, I co-founded Thrive Senior Living here in Atlanta, and we brought 23 buildings out of the ground, all resorts, AL/memory care. This was right after 2008, when everyone said don’t do anything, it’s tanking. And we saw a pathway for technology blended with buildings to offer a new product.

And so we brought those buildings out of the ground and we had very good success in the early days, particularly when not a lot of people had technology in the space. So, we were seeing buildings, $12 million lease-up with 18 months. We had a transaction on them, dispose of them in about 24 months with multipliers of about 2.25. So, we thought it was our great plan when a lot of it was the market at the time.

But things began to shift. Everybody ran into the market and said, “Wow, this is a great place to be.” I’m used to $500, $800 a month rents, and now I’m seeing I can get $5,000 rents a month from seniors. And the statistic has not changed. We have 10,000 people turning 65 years and older every single day. And these are the baby boomers, and this is the Woodstock generation. And I would challenge you and say, not only are they not going to want any med management, they’re going to demand for various medications to be supplied in the senior housing industry. And we’re seeing changes in regulations for medical marijuana across the country.

So I shifted in 2017 to the middle market. I went to Florida, partnered and founded Mainstay Senior Living, where we looked at distressed assets, very distressed, REITs were disposing of them, got great deals on them. We had a vertically integrated platform. The gentleman I worked with was brilliant and we invested $4 or $5 million in the buildings. We had a low basis and we were able to charge a rent about $500 to $1,000 less than everyone else. And we filled them up because the middle market in senior housing is about 40 to 60%. There’s debate on the numbers unserved.

So all the products you see on the corners that have come up out of the ground are targeting the top 10% of income. That’s the target. You got to come in at a $4,000 or $5,000 price point, which leaves 60% of the market unserved. So here’s the different models that we’ve seen built over the last 10 years. You have skilled nursing, which is going away. No one wants to go to skilled nursing anymore. You have assisted living and memory care. Those are the beautiful buildings on every corner in Atlanta that are 30% to 50% of full right now. I don’t know who underwrote them, a lot of money invested in them. You have independent living, which is for folks that don’t need care. And then you have 55 active adult.

All these platforms have been built standalone primarily, generally speaking standalone products, to meet a certain demographic group. So this whole thing has changed with COVID-19. And I don’t think you’re going to hear that anywhere else. When you get on your Zoom meetings they’re going to tell you that we’re just waiting for equity to thaw, we’ll get back up and running, we’ll get these buildings full, but a lot has changed.

The things that have changed, one is demographics are changing, going to talk about that. Number two, with the demographics, what clients are demanding, number two, COVID-19 in three regulations. Let’s show them the next board, Jimmy. So, here’s the new model. What I’m going to attempt to do is try to explain a converging, demanding a new product we’re seeing.

The problem we have now is we’ve had no admissions over the last six months in assisted living and memory care because of shutdowns. There’s a 40% attrition rate in senior housing every year. So no matter what products you have, you’re going to lose 40% of your customers because they’re not staying there forever. The average length of stay is probably now about 12 to 18 months, and it’s getting smaller and smaller because people are not going in until they absolutely have to. Which means they’re going in when acuity levels, their need is much higher than before. So if there’s a 40% attrition in a hundred unit building, that means you’re going to lose 40 residents a year. So for the last six months, you’ve lost half of that. So, owners have lost 20% of their clients over the last six months and have not been able to replace them. And it’s putting pressure on their bottom line.

And the second problem you have is that when everybody was moving into the space and marginalizing healthcare and talking about their beautiful bistros, which I do like them, their beautiful fireplaces, they talk about the senior who’s 87 years of age coming down at four o’clock and having a brew at their bistro and talking about the old days. Well, I can tell you, being in the industry as long as I have, that doesn’t happen. When you’re in assisted living, you are over 85. Average age is 87 years of age. You have three or four comorbidities; you go there because you have memory loss. Over the age of 85, one in two have dementia and one in three have Alzheimer’s.

So the reason they go in is because they need care. So it’s all about healthcare, but the development group said, no. It’s about beautiful buildings, large spacious spaces, which I think Melissa’s going to talk about that, they didn’t design the building for healthcare. So now we have a pandemic. No one knows how to quarantine. No one has systems in place to take care of the residents. And there’s a lot of unhappy people because no one cares about the bistro. No one cares about the bar in assisted living. And the regulations are allowing people to stay longer in assisted living because the state does not want them having to pay their beneficiaries in skilled nursing.

So what’s going to happen with this AL memory care model? It’s going to be designed to allow people to stay longer. It’s going to be a post COVID-19 building, so we’ll have temperature checks when people walk into the room, we’ll have air handlers that are moving the air more frequently, we’ll have washers and dryers in the resident’s room. And whoever develops that model can charge more rent after the pandemic than before and fill it up because all the buildings are not equipped right now to do that.

The second thing that’s going to happen is this independent living group here, that’s the 75 year old baby boomer, they’re not going to like the product that’s on the ground right now because they want a cool and a hip place. So they’re the ones, even though we built for the older adults, it’s the 75 to 85 year old that wants the bar. They’re going to be down at four o’clock at the bistro, trying to hook up with somebody.

If you look at the statistics, most people between 70 and 80 are experiencing either a death of a loved one or a divorce. It’s one of the highest divorce rates in the demographic groups. Yeah. So when that happens, they’re moving for financial reasons. They’re ready to dispose of their asset, manage their wealth because they don’t have a pension, and they’re going to move close to the grandkids. And when they do move, they want to rent. And you can read about this every day. So they’re going to want to go to a place where they can have their own apartment, they can make their own meals if they want to, but they’re going to want a point of sale bar. They’re going to want a zero entry pool, they’re going to want to meet people. They’re going to want entertainment, security, safety. And technology is such now that we can bring it into the building where they don’t have to go to an assisted living.

I’m not going to an assisted living until my memory fails and they’re going to drag me there. And I won’t know it then. So, this new model is great opportunity for an independent model that will deliver that to the customer. And then the after 55 is along the same lines. For those that want a wealth management circumstance, where they sell their asset, can move, and have services provided to them without healthcare with people that don’t have walkers and wheelchairs, there’s opportunity there.

Let’s go back real briefly, and then I’ll end here with the middle market. We know in August 1st 8,000 hotels filed bankruptcy. Those hospitality assets, I don’t know if they’re going to come back, and a lot of REITs are disposing them right now. And they have very good bones to remodel into independent living. We’re seeing them priced well below new construction cost for assisted living.

And we see investors’ appetite for distressed assets repurposed for senior housing versus not a lot of money chasing the old model anymore. The old model that was brand new one year ago, that’s now fairly distressed. And there’s plenty of capital out there. We’re hearing from people every day. Like, “Hey, we only deployed 30% of what we had in our billion-dollar fund and we need to deploy it. What do you have available?” And they’re running toward active 55, they’re running toward independent living, they like the new AL memory care model, but they really like distressed hospitality assets.

Jimmy C.:
Welcome back guys. Hope you enjoyed that clip. Tod, could you please tell us a little bit about why this is so important moving into 2021?

Tod Petty:
Yes. What I want the audience to take away from the information we shared today, Jimmy, is a couple things. First, the old saying, we all know the definition of insanity is doing the same thing over and over again, and thinking you’re going to get a new result. We can’t keep doing the same thing we’ve done the last 10 years in senior housing and think we’re going to get a different result. We have to change. And I want the audience to be prepared for this change.

The second thing that everyone needs to understand is that money doesn’t go away. It only moves and money is moving now.

Jimmy C.:
Oh, absolutely.

Tod Petty:
Money doesn’t go away; it’s moving and needs to be reinvested. And it needs to be in reinvested in a new model in the future as a result of the demographics and the changes that have occurred. So there’s great hope. There’s a great vision and there’s great opportunity to serve the middle market, to serve the under 85 older adults that want relevancy, want a more affordable product that can bring healthcare into their community. There’s opportunity to create a luxury healthcare model and there’s opportunity, unfortunately, because there’s distressed hospitality, there’s opportunity to buy it, repurpose it at an affordable price, and re-employ everybody that worked there. So this great opportunity, but we have to change. Life is a continual change, and the win belongs to those that are able to make the change as well. One constant we always have is change.

Jimmy C.:
Well, we’re definitely going to have a lot of changes in 2021. And speaking of 2021, Lloyd Jones is going to have some exciting news. We will soon be launching our brand-new websites. Yes. Websites with the plural S. Not only are we revamping our current website for our investment and development division, but we’re also adding dedicated websites for a senior living division and for Lloyd Jones multifamily management. So, visitors can learn more about the solutions we provide in the multifamily and senior housing space.

Tod Petty:
Yeah. That’s going to be great, too, because we’re combining the Miami office at Brickell Bay, and then also the Ponte Vedra office and the senior housing office, just streaming them all together. We’re going to bring all of our blogs, all of our podcasts, all of our deliverables, all of our free downloads will all be available at the Lloyd Jones Senior Living website. Looking forward to that, and we’ll keep people abreast of that as well.

Jimmy C.:
Yep. We’ll share more with our listeners when the sites launch in early 2021, but we’re looking forward to providing this experience to everyone who visits Lloyd Jones on the web.

Tod Petty:
Yeah, so thank you everybody for visiting today. We appreciate your loyalty. Our greatest quest is to bring value to you. And remember next month we’ll be doing The Leader’s Greatest Gift of what we can give back to people. So, thank you. This is Tod Petty and Jimmy Carrion, Senior Housing Unfiltered. Have a Merry Christmas and we’ll see you next month. Thank you.

Although the divorce rate in the U.S. is on the decline, among those 50 and older, the rate has doubled since 1990, based on data from the National Center for Family & Marriage Research at Bowling Green University.[i] This study revealed that one of out of every four people going through a divorce is 50 or older, and more than half of these divorces are couples that have been married for more than 20 years.[ii]  Gray divorce is the term used to refer to the these later-in-life divorces.

While divorce can be difficult at any age, it’s especially challenging for people over 50, with emotional, financial and health implications, especially for women.

Norma Perez, PhD, is a psychologist in Lakeway, a suburb of Austin, TX, whose practice includes divorce support for seniors. She attributes the rise in divorce rate among seniors to both the shift in the attitudes toward divorce as well as the rise in women’s empowerment. “There’s no longer the stigma attached to divorce, and women are recognizing that they have a voice,” said Perez. “They are more confident of their ability to live independently and design a life that’s better for them.”[iii]

Finding a new life at senior living communities

“Post-divorce, it’s both a matter of grieving the loss of the life they had, and how to rebuild a new life,” said Perez. “Women are afraid of losing their friends as a result of the divorce.” But, she says, senior living communities offer a solution.  “One of the aspects I most like about senior living communities is that they provide an instant social network of peers with generationally similar life experiences. There’s also the opportunity to diversify your interests. Active adult communities make it easier to broaden your horizons, and meet new people through organized activities, and groups for tennis, cards or crafting.”

Choosing a rental community can be a smart financial decision for a gray divorcee. By selling her home, she can free up the equity, giving her more financial freedom, and making it easier to control expenses. Mortgage payments, property taxes, and homeowners insurance are all eliminated, along with the expense of maintaining of a larger home.

Senior rental housing also gives her the flexibility to move closer to adult children, or to try out a different city to begin this new phase of life.

From an emotional standpoint, leaving behind the family home to begin anew can be very freeing.  “It’s an opportunity for a fresh start in a vibrant, engaging community designed for successful aging in place,” said Tod Petty, executive vice president of Lloyd Jones Senior Living. “Our AVIVA-branded rental communities offer a built-in network of friends, social activities and wellness services.”

Seniors who divorce often find themselves without the support system they had counted on: a spouse to care for them in their old age, and a circle of friends that they had as a married couple. One of the biggest health concerns of gray divorce is isolation, which many studies have linked to a greater risk for higher levels of depression, higher blood pressure, weight gain and chronic diseases.[iv]

So, a very important benefit of senior-living rental communities is the camaraderie of peers, and a fun, active social environment with planned activities—helping to avoid the isolation that often comes with gray divorce.

Petty adds, “We’ve designed our AVIVA communities to encourage engagement. The clubhouse is the social hub of the community, which includes a resort-style pool, fitness center, bistro, multipurpose rooms for activities, and social lounges. Plus, healthcare services are available if they are ever needed.”

For those going through a divorce later in life, creating a strong foundation and clear expectations about the future is the first step to reinventing oneself, and active adult communities can be just the place to begin anew.

To learn more about AVIVA senior living rental communities, visit

https://www.lloydjonesllc.com/divisions/aviva-55-by-lloyd-jones/

_____

[i]     https://www.bgsu.edu/ncfmr/resources/data/family-profiles/allred-gray-divorce-rate-geo-var-2017-fp-19-20.html

[ii]    https://www.bgsu.edu/ncfmr/resources/data/family-profiles/spangler-brown-lin-hammersmith-wright-divorce-fp-15-09.html

[iii]   https://mindbodylifeconnection.com/

[iv]   https://www.detroitnews.com/story/business/personal-finance/2019/07/22/personal-finance-divorce-fifty-devastating/39705307/

Most people envision living out retirement years in a home with a paid off mortgage, or downsizing to buy a smaller home. In fact, close to 80 percent of people 65 and older own their own homes. However, a growing number of retirees are reimagining the traditional retirement model. Renter households over 60 have increased considerably—growing 43 percent over the past decade, outpacing owner households and growing faster than other age groups, according to RentCafe. For those retirees who decide they no longer need the space or the upkeep that comes with a large home, renting makes sense from both a financial and lifestyle perspective.

For retirees who decide to sell their home and move into an active adult or independent-living rental community, there are myriad financial benefits. Mortgage payments, property taxes, and ever-rising homeowners insurance rates are all eliminated, along with the sometimes unpredictable repair expenses that come with a larger home. By selling their home, seniors can use the equity to better manage their retirement financially, freeing up funds for investment, travel and future healthcare expenses.

Moving into a rental home or apartment also means fewer estate headaches. Children often disagree over what do with a parent’s house after their death: one might want to move in, while another may want to sell. And selling the family home can be an emotional and complicated process for heirs. The move to a rental community gives retirees an incentive to downsize, declutter and give away family heirlooms and other cherished possessions now, leaving fewer decisions for children and grandchildren to make later on.

Renting can also be a less costly, more convenient lifestyle, giving retirees the freedom to try out new towns, and move closer to children or grandchildren. With a rental home, all the maintenance chores—from lawn care to raking leaves to exterior painting—are now handled by the property management team. And of course, there are the amenities that many active-adult and independent-living complexes offer—from resort-style clubhouses and swimming pools to fitness centers, walking trails, and a full calendar of social events.

Retirees should think long-term when deciding to rent or own in retirement, and talk with their financial advisor to determine the best strategy. Weighing factors like the impact on retirement savings and spending, investment returns, and home appreciation will help determine the best course of action.

You know the collection of bobble-heads you bought on a trip to Coney Island? How about that darling doll with only one arm you loved as a child? Tupperware containers with missing lids? All those thread-bare dish towels? Your mother’s cookbooks? Coffee makers, your collection of Johnny Mathis records?

Do your kids –and yourself -a favor. Clean out your attic, your cupboards, and your closets. Don’t leave that burden to your kids.

As we age, our homes become too big, too much work, and often unsafe. At some point we will have to move, sometimes willingly, sometimes not. More and more seniors are being proactive, choosing to downsize to an active adult community while they can still enjoy the new lifestyle. A new lifestyle without shoveling snow, cleaning gutters, climbing ladders, or even climbing stairs.Maybe even a lifestyle with dining and housekeeping.

It could be a wonderful opportunity. But getting there from here can be a daunting task. And even more daunting would be an emergency that precipitated a quick move.

When downsizing, it seems we have three choices: fight it until it’s absolutely necessary and become overwhelmed with the prospect; do nothing and saddle our children with hard decisions and the burden; or the wisest, start early and plan for an exciting new lifestyle.

But this requires discipline. You have to start today, not“when you have time” or “someday.” You can start small. If you buy a new toaster, dump the old one. Break the handle off a cup? Throw it out; don’t save it hoping to get around to gluing it. Then tackle that collection of telephone books; old, dried paint cans; broken furniture you had hoped to refinish.

In the meantime,

First, call your kids. Do they have any interest in your grandmother’s crystal? Or your collection of bobble-heads? Give them an opportunity to label items for future reference (or to take now). You might be surprised at what is important to them –and what is not. Even your most sentimental child may not want anything to do with your wedding silver if it has to be polished.

Clean out drawers, file cabinets. Throw away anything that you don’t absolutely need: a property appraisal when you bought your house 20 years ago; tax returns of 1950. Do you really need that yellowed letterhead from the previous address? How many outdated dresses are in your closet “just in case” an occasion arises?

Talk to an estate-sale expert. What do you do with your furniture and collectibles? These people can be a great help and comfort in your decision making, especially with china, silver, and crystal. They can arrange off-and on-site estate sales and offer you professional, objective advice.

Plan a yard sale or call your friends to thin out your furniture. Your furniture will sell for pennies on the dollar if you have to give it to a consignment shop. So, try to sell it first. Look around your home. If you could move only a few pieces, which would they be? Chances are, even in a luxury senior community, your home will not be as large as the one in which you raised your family. You don’t have to sell everything now and live at your kitchen table; just be prepared.

One day, most of us will have to make a decision about where we will spend the rest of our lives. Chances are it will not be in the big family homestead. So be proactive. Be prepared. Do yourself –and your kids -a favor so when the opportunity/necessity arises, your move can be (relatively) stress-free.

10,000 baby boomers are retiring daily. Similar to the previous generation, baby boomers will be downsizing and seeking a new style of living, but their preferences will be extraordinarily different than that of their predecessors.

4 key areas will shape the way in which baby boomers will retire:

1. Technology: contrary to the generations before, baby boomers have access to modern technology that will influence how they spend their retirement. Wearables, home devices like Amazon’s Alexa or Google’s Echo, and  tablets are helping seniors stay connected while improving their lives.

2. Well-being: fitness regimes and nutritious lifestyles are growing trends that are desired by seniors. Facilities that incorporate classes and offer a means to stay fit and healthy will help slow down aging and be more sought after as a result.

3. Personalized care: another way in which the baby boomers will be differentiated from the generations before will be the ways in which they are cared for. The boomers will expect personalized care and concierge style services to meet their needs, and they will not tolerate the condescending way in which many have been treated in senior living facilities.

4. Community: According to the Pew Research Center, the number of adults living alone has been steadily declining since 1990.  PRC also states that older adults who live alone are less likely to be financially comfortable, have contact with friends or family, and spend time on hobbies (see sample chart below). Given these statistics, it is more important than ever that senior living offer a community-based lifestyle to keep older adults vibrant, happy, and engaged.

Throughout recent history, a mark of American status was the spacious home with the plush yard and picket fence. Young couples and growing families strove for this style of living to exemplify their status and enjoy what may be perceived as the American dream.Today, the home with the picket fence is no longer a goal for many. Most millenials and the new era of young families are opting for flexibility, mobility, maintenance-free lifestyle which can be found in multifamily. As mentioned in last week’s blog, We are living in a rental economy, 82% of renters affirmed that renting is the affordable option, and this trend is only growing.

Earlier this year, the WSJ confirmed in their article A Growing Problem in Real Estate: Too Many Too Big Houses that “Large, high-end homes across the Sunbelt are sitting on the market, enduring deep price cuts to sell.” The same homes that were once sought after as a status symbol are no longer regarded as such. The article goes on to state that “Now, many boomers are discovering that these large, high-maintenance houses no longer fit their needs as they grow older, but younger people aren’t buying them.”

According to Fannie Mae’s report, The Coming Exodus of Older Homeowners, boomers’ homeownership is projected to decrease by nearly 30 million over the next couple of decades (see chart below). Across all demographics, we are witnessing a shift toward more practical living, multifamily

The senior housing industry is in the midst of a big disruption.  Occupancy in assisted living hit a record low in the first quarter of 2018 – and continues to fall. There could be numerous reasons for this, including a bad flu season, but I think there’s something bigger going on.

At a recent conference I attended, one of the speakers addressed this subject.   He suggested that two major influencers are driving the disruption.

  1. Labor shortage. A labor shortage is anticipated for high-intensity facilities such as assisted living, memory care, skilled nursing facilities. The average wage for a CNA (certified nursing assistant) is currently $11 per hour.  Soon, the speaker projects,  it will be $15. This will cause an 8% drop in NOI which translates to a 27% decline in asset value!  Or, more likely, rents will rise, and such facilities will become even less affordable.
  2. Technology. And this is where it gets cool! Technology is focusing on aging-in-place, allowing seniors to avoid institutional facilities longer. The speaker shared that aging-in-place technology will become a $7 trillion economy. Venture capital is investing 10:1 on technology versus operational improvements.

So how does this affect you and me?
It means we can age in place almost anywhere.  The secret is in choosing the place. If we live long enough, each of us will need assistance at some point, (although most of us refuse to admit it).  But technology will allow us to live wherever we choose with on-demand assistance as necessary.

Even today, technology is available to get us what we need, when we need it: a voice activated communications system connected with family or emergency-response team;  a sensor to monitor activities and detect irregularities;  a wrist band connected to an AI platform that alerts the doctor if anything is out of kilter;  apps to remind us to take our pills; apps to call a ride; apps to order meals; apps to request assistance with dressing or bathing; apps for help hanging pictures or rearranging furniture.

And that’s today.  Just wait until that $7 trillion investment is realized!
I project the future of senior housing will be focused on the independent-living model with limited services – which will be offered a-la-carte.  Technology will replace the need for personal assistance. We will not need (nor can most of us afford) the full staff that comes with assisted-living facilities. With this exciting new technology, we will remain independent much longer as we age in place.

But aging-in-place doesn’t mean staying in your four-bedroom colonial with stairs, narrow doorways, and slippery bathtubs.  Forward-thinking baby boomers are eschewing their large family homesteads that require constant up-keep and high taxes for luxury apartment living.  Here, they can age in place, but in a place with more amenities, more fitness activities, more social involvement, and more companionship.  And that socialization is very important.  Studies show that social isolation increases the risk of death by 30%;  some show it as high as 60%!

Assisted living and memory care facilities, of course, will still be needed, but they will have a much higher cost and be even less affordable to the average senior.  That said, senior housing still ranks as the most attractive property class for investment according to a recent survey of commercial real estate owners, managers, developers, and lenders.

So, we will age, in place, independently, and wherever we want. And I suspect most of us will choose an independent-living community surrounded by like-minded, active, involved friends – and cool technology!


Christopher Finlay  is Chairman/CEO of Lloyd Jones, a real estate investment firm that specializes in the multifamily and senior housing sectors. Based in Miami, the firm acquires, develops, improves, and operates multifamily and senior housing communities in growth markets throughout Texas, Florida, and the Southeast.  The firm’s investment partners include institutions, family offices, and individual accredited investors.

In reviewing 2015, I am reminded of the issues that dominated multifamily investment discussion.

Let’s start with the funds. Blackstone Group LP, the world’s biggest alternative-asset manager, has collected $15.8 billion for its global real estate fund. As of June, 2015, it was overseeing $93 billion in real estate assets. Goldman Sachs is oversubscribed for its $5.3 billion real estate fund. (bloomberg.com/news.)

What does this mean? These are smart people – and they have chosen real estate as their investment class. We all know that real estate provides a stable diversification to the volatility of the equity markets, and it has outperformed those markets for many, many years. But the enormity of these funds is concrete affirmation of its global favor.

Then consider the Millennials: 25 million classic apartment renters are still living at home. And it will be a while before they can afford—or want –to purchase a home: student debt; flexibility to move for job opportunities; later marriages and children, etc. And recently FHA has ruled that potential home buyers who carry student debt will have to include that debt (even deferred) in their debt-to-income calculations. So it will be even harder to qualify for a mortgage. They (25 million) will need rental housing. That’s a lot of apartments.

And the Baby Boomers (born between mid-40s and mid-60s) are also looking to rent. There will be 76 million baby boomers retiring en masse in coming years. Some reports anticipate that in the next fifteen years, renters 65 and older will grow in number to 12.2 million. (Gloria Stilwell, Bloomberg News) Other reports suggest that Boomers may be slower to downsize as the housing bubble peaks, but add that this situation is temporary. Boomers currently occupy 32 million homes, but as circumstances inevitably change, “their actions will reverberate through the housing market.” (Kenneth Harney, Washington Report to Miami Herald. 12/6/15.) That’s even more demand for rental apartments.

That brings us to the housing bubble. With the rise in housing prices, the “US housing market across the board is moving toward rent territory,” Ken Johnson, Ph.D. Especially in Dallas, Houston, and Denver, in terms of wealth creation, data suggest renting as opposed to buying.

Finally – senior housing: It’s not your grandma’s “old folks” home. No more rocking chairs; no more flowered wallpaper, antique credenzas and calico curtains; no reference to “retirees.” By federal law, 55 is the minimum age for “senior housing,” but who at 55 wants to be considered “senior”? (My wife has refused senior discounts because “It sounds so old.”)

Our Baby Boomer renters want a continuation of their active and social lifestyles –but without the headaches. They want modern, show-house furnishings, designer finishes. They want a carefree, luxury lifestyle. They want rental apartments.

Put these all together, and the future of multifamily investment is very exciting. We are going to be busy. The problem is that everybody is jumping on the bandwagon, and there are some crazy deals going down. Good investments are out there, but they are really hard to find. That’s why Lloyd Jones Capital has “boots on the ground” in each of our markets. Not just any boots, but highly experienced VPs, teamed with regional property managers. They scout the area for off-market opportunities.

For 2016, multifamily will continue as the darling of the real estate investment industry. But we must be careful. I predict a cap rate compression unlike anything we have seen before. And that will create other issues. (But I’ll discuss those in another message.)

In the meantime, we aggressively look for solid B and C properties in B and B+ neighborhoods, properties with steady cash flow that show opportunity for improvement. It takes hours and hours of looking and a lot of hard work, but we at Lloyd Jones Capital are very proud of our work ethic and the success it brought us in 2015. And we expect 2016 to be even better.

Christopher Finlay is Chairman/CEO of Lloyd Jones Capital, a private-equity real-estate firm that specializes in the multifamily sector. With 35 years of experience in the real estate industry, the firm acquires, manages and improves multifamily real estate on behalf of its institutional partners, private investors and its own principals. Headquartered in Miami, the firm has operations throughout Texas, Florida and the Southeast. For more information visit: lloydjones.wpengine.com.