Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois...

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Need for affordable Assisted Living 1

Transcript of Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois...

Page 1: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

Need for affordable Assisted Living

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Page 2: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

Over the next 20

years, the US

population age

65+ will nearly

double from

40.2 million to

71.5 million

10,000 Baby

Boomers are

turning 65

years old

every day –

that’s one

every 19

seconds – and

they will be

living longer

lives.

2 Source: US Census Bureau (based on 2010 census)

Page 3: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

3 Source: US Census Bureau (based on 2010 census)

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Page 4: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

As older adults continue to

age, they experience an

increasing need for

assistance with

instrumental activities of

daily living (IADLs) – meal

preparation,

transportation,

housekeeping, assistance

with finances – as well as

activities of daily living

(ADLs) – bathing, dressing,

grooming, personal

hygiene, and medication

management.

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Sources: US Census Bureau (based on 2010

census) & Genworth Financial 2012 Cost of

Care Report

The average cost of

assisted living across

the US is just over

$3,300/month (and >$4,000 in Illinois).

Page 5: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

Technology

High Cost of Technology and Continual Updating Required

Impact on Communication & HIPAA

Seniors Prefer Individual Attention Rather Than Tech Use

Labor

Increasing Pressure to Attract & Retain Qualified Workforce

Wages Rising Faster Than Anticipated Due To More Skilled Labor Needs

Nursing Shortage

Rising Cost of Benefits (Health Insurance) and Insurance

Regulation

Increased Acuity Impacting Operating & Building Construction Costs

Health Care Reform and Coordinated Care

State-Specific Challenges

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Page 6: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory
Page 7: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

Privately held, Chicago-based developer/owner/operator founded in 1997

Currently operates 14 assisted living communities and senior

apartments in Illinois and Wisconsin with nearly 2,000 units

Ranked for past 5 years as Top 80 largest providers of assisted living

by Assisted Living Federation of America

Started as a development company that developed assisted living

facilities, now an Assisted Living company that can develop.

70% of all revenue coming from Medicaid.

Operations managed by a team experienced in seniors’ housing,

hospitality, health care.

Distinct team focused on development and affordable housing finance.

Teams intersect at two points: design/underwriting and compliance

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Page 8: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

Combine Government Programs

Centers for Medicare and Medicaid Services (CMS) Medicaid

Waiver Program

IRS Section 42 Low Income Housing Tax Credit (LIHTC) Program

Other affordable housing finance programs: HOME, FHLB AHP,

Housing Trust Funds

Issues of Housing finance in Assisted Living

Cutting edge between housing and health care

Units must meet minimal definition of housing;

Full Baths

Kitchens with cooking unit (microwave)

Cognitive ability of residents

Income restrictions of residents and ability to pay for services

Spend down of assets acceptable

Assistance from family counted as income

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Page 9: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

Illinois “affordable” assisted living model proposed in 1996 with the first community (Victory Centre of Joliet) opened in 2000

License allows for min 10 to max 150 beds

Serves those age 65+ or those disabled and age 22-64

Must score a 29+ on the Determination of Need (DON)

Need assistance with two activities of daily living: dressing, cooking, bathing etc.

Must not have a diagnosis of a developmental disability or a serious and persistent mental illness

Facilities may be open to all incomes depending on tax credit requirements.

If same total monthly rate, no minimum requirement of Medicaid residents.

If different rates, premium for private pay, minimum 25% of units to Medicaid residents.

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Page 10: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

136 operational sites with 10,669 units

28 applications approved & sites under

development for an additional 3,158 units

73 0f 102 counties served

62% of residents are on Medicaid

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0

2,000

4,000

6,000

8,000

10,000

12,000

1/1/00

1/1/01

1/1/02

1/1/03

1/1/04

1/1/05

1/1/06

1/1/07

1/1/08

1/1/09

1/1/10

1/1/11

1/1/12

Growth in # of Beds

Page 11: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

Standard Services (No different than most ALFs)

3 daily meals (some reimbursement through Food Stamps) plus snack available 24 hours each day

Weekly housekeeping and laundry, along with daily tidying and bed-making

Medication management stored in a locked cabinet in apartment or in Wellness Center

Assistance with activities of daily life (bathing, dressing, grooming)

Nursing consultation

Scheduled activities and transportation

Routine maintenance

Resident call system

Self-Imposed Limitations

(Due to higher operating/staffing costs)

Certain restricted diets

Full assistance with feeding

Uncontrolled incontinence

2-person assistance with bathing and/or

transferring

Full assistance with ambulation

Elopement risk

Medication administration outside of

RN/LPN schedule

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Page 12: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

Executive Director

Dining Services Manager

Cooks

Utility Workers

Waitstaff

Maintenance Manager

Housekeepers

Sales Manager

Community Relations

Business Office Manager

Receptionists

Life Enrichment Manager

Resident Care Manager

(RN)

Licensed Practical Nurses

(LPNs)

Community Life Manager

(CLM)

Life Enrichment Aides (CNAs)

Volunteers

Coordinated Care Staff

Salaried Exempt Position

Hourly Position

Temporary Salaried Exempt

Position

Management Team

Third Party Positions

Non-Paid Position

Page 13: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

Total Amount for Single Resident = $2,958/month

RENT – Resident responsible for Rent ($608/month for single, $868/month for married couple)

COVERED SERVICES – For Medicaid Residents = Varies by geographical area, but based on 60% of SNF Medicaid rates

FOOD STAMPS – Roughly $100/month, though not everyone is eligible and payment rates vary

Phone and Cable

Not part of service package; some operators include while others offer for an additional fee

Medicaid residents keep $90/month in income for incidental expenses

Up to 30 paid days annually for temporary absences

Chicago Area =

Approx. $75/day

or $2,250/month

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Page 14: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

All-in monthly rate (Rent + Covered Services) ranges from $2,958 (the

Medicaid rate paid privately) to $4,475

Varies by community and floor plan selected

Because of tax credit limitations, newer communities (>2007) require a

lower maximum income than older communities (e.g.. In Chicago,

newer communities have income limit of $31,680 while older

communities have a higher income limit of $33,120

Most Pathway communities have some market rate units with no income

restriction

Unit Type (tax credit vs. market rate) is a often confused with Payer

Source (Medicaid vs. private pay). Often, private pay market rate

residents are eligible for a tax credit unit based on their income.

Properties have only two rates: Medicaid and Private Pay. There is not a

middle tier for tax credit eligible but non-Medicaid residents (income

between 25,000 and 32,000).

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Page 15: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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Payer

Unit

Sq.

Feet

Units

(Beds)

Room &

Board Services

Food

Stamps

Total Monthly

Rate

Current

Occupied Beds

Medicaid Studio

360 sf 104 $489 $1889 $64 $2442

75

72%

$2,950 (assumed $2916 based on

3% annual increases)

Private Pay Studio

360 sf 0 $489 $1953 $0 $2442

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28%

$3,850 (anticipated but did not

underwrite the number of

private pay with <$30K)

Total 104 Stabilized occupancy underwritten at 92%

104

100% (have been between 98-

100% for over three years)

Page 16: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

A Brief Tour of Pathway Senior Living’s

Affordable Assisted Living Portfolio

Page 17: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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Roseland (Chicago) – Opened 2006 Country Club Hills – Opened 2005 Bartlett – Opened 2006

Galewood (Chicago) – Opened 2009 S. Chicago (Chicago) – Opened 2009 Vernon Hills – Opened 2012

Page 18: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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Page 19: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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Page 20: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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Page 21: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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Page 22: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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Page 23: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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Page 24: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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Page 25: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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Page 26: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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Page 27: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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Page 28: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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Page 29: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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Page 30: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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Page 31: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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Page 32: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

Making The Case For Alternate

Financing With Low Income

Housing Tax Credits

Page 33: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

Unit Mix

104 studios in SLF

104 one- and two-bedroom apartments in SA

100% tax credit eligible units – all units require income restriction

Opened

December 2006 SLF / March 2007 SA

Highlights

$19.8 million SLF / $18.2 million SA development cost ($183,000/unit)

78,690 square feet SLF building / 99,065 sq ft SA ($215/square foot)

45%/55% common/leasable in SLF and 30%/70% common/leasable in SA

Built using tax credits with at least 4 layers of financing (bond financing)

14-month construction period

11-12 month lease-up period to turn on tax credits / 14-15 months to 92% stabilization

55 FTEs SLF / 2 FTEs SA

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Page 34: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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INCOME ANNUAL /UNIT /MONTH

Rental Revenue 783,120 7,530 628

Services 2,351,242 22,608 1,884

Food Stamps 80,080 770 64

Vacancy Loss (257,155) (2,473) (206)

Gross Operating Income 2,957,288 28,435 2,370

EXPENSES ANNUAL /UNIT /MONTH

Operations & Marketing 1,637,449 15,745 1,312

Utilities 86,244 829 69

Real Estate Taxes & Insurance 109,320 1,051 88

Management Fees (5%) &

Reserve 199,864 1,922 160

Total Expenses 2,032,877 19,547 1,629

NET OPERATING INCOME 924,411 8,889 741

Debt Service (804,005) (7,731) (644)

Cash Flow 120,405 1.15 DSCR 1,158 96

Page 35: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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HARD COSTS

General Contractor Costs 10,451,496

FF&E & Other Hard Costs 1,118,110

Total Hard Costs 11,569,606

SOFT COSTS

Construction Soft Costs 778,951

Construction Period Financing 1,037,460

Legal Fees 166,000

Title & Closing Costs 27,500

Perm Loan Financing Costs 529,977

Due Diligence Costs 40,247

Miscellaneous Costs 1,538,527

Total Soft Costs 4,118,662

LAND 900,000

TOTAL USES 19,807,365

RESERVES & ESCROWS 1,245,000

DEVELOPER FEES 1,974,097

FINANCING SOURCES

1st Mortgage – IHDA Risk Share 10,330,000

IHDA HOME Loan 3,000,000

Federal Home Loan Bank

(FHLB) – AHP Grant 750,000

Low-Income Housing Tax

Credit (LIHTC) Equity 4,580,463

Deferred Developer Fee 1,146,902

Total Financing Sources 19,807,365

Page 36: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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INCOME ANNUAL /UNIT /MONTH

Rental Revenue 928,032 9,012 752

Services (laundry) 5,928 57 5

Food Stamps 0 0 0

Vacancy Loss (46,698) (449) (37)

Gross Operating Income 887,262 8,531 711

EXPENSES ANNUAL /UNIT /MONTH

Admin/Ops/Maintenance 166,188 1,598 133

Utilities 63,589 611 51

Real Estate Taxes & Insurance 158,400 1,523 127

Management Fees (6%) &

reserves 79,236 762 63

Total Expenses 467,413 4,494 375

NET OPERATING INCOME 419,850 4,037 336

Debt Service (365,117) (3,510) (293)

Cash Flow 54,732 1.15 DSCR 526 44

Page 37: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

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HARD COSTS

General Contractor Costs 12,135,623

FF&E & Other Hard Costs 1,318,656

Total Hard Costs 13,454,279

SOFT COSTS

Construction Soft Costs 803,039

Construction Period Financing 405,460

Legal Fees 108,677

Title & Closing Costs 22,668

Perm Loan Financing Costs 156,961

Due Diligence Costs 25,057

Miscellaneous Costs 530,606

Total Soft Costs 2,652,466

LAND 600,000

TOTAL USES 18,226,024

RESERVES & ESCROWS 190,369

DEVELOPER FEES 1,928,910

FINANCING SOURCES

1st Mortgage – IHDA Risk Share 4,867,000

IHDA Trust Fund 2,698,699

Federal Home Loan Bank

(FHLB) – AHP Grant 581,000

Low-Income Housing Tax

Credit (LIHTC) Equity 9,596,996

Deferred Developer Fee 482,327

Total Financing Sources 18,226,024

Page 38: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory
Page 39: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

16-Year Hold 1 year to construct

15 years extended use agreement

Will be required to maintain affordability between Years 16 - 40

Cash Flow Splits 70 - 80% GP / 30 - 20% LP

Residual Sale Analysis in Year 16 Use Trailing 12=Month NOI

Assume Sale Cap Rate of 10% (worse than market rate ALs but better than SNFs)

Equity Split of 80% GP / 20% LP

Tax Credit Turn-On Issues Financing and construction delays

Slower than anticipated lease-up

Applicants over income limits

Lease-Up Period Issues Resident turnover

Generally less than 2 years to achieve stabilization, which is better than market rate communities based on NICMAP data

IOD reserves

Annual Cash Flow Issues Expenses rising faster than anticipated

Revenue increases lower than expected

Contingencies for Medicaid delayed payments 39

Page 40: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

Combination of RE and Operating Business

Highly competitive LIHTC award process

Complicated marriage of multiple government

programs

Ongoing LIHTC & Medicaid compliance

Long-term hold requirements

Limited capital flexibility once capital structure put

in place – receivable financing

LIHTC Investor reluctance

Bonding agencies’ view of Illinois limiting first debt to

HUD (no Risk Share)

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Page 41: Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois “affordable” assisted living model proposed in 1996 with the first community (Victory

Rising acuity Medicaid eligibility changes, including the DON score change and

its impact on admissions

Market rate residents generally older and more frail than Medicaid residents

Health care reform/Managed care (Fed and State) Growth of dual eligible Medicare/Medicaid managed care

providers

Reimbursement rates under managed care

Acuity based payment rather than flat rate

State of Illinois

Program not accepting new applications for AL

Memory care pilot to start

Payment delays (5 to 6 months currently)

Rate reductions (3% currently)

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