Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois...
Transcript of Need for affordable Assisted Livingservices.housingonline.com/nhra_images/Bob Helle.pdfIllinois...
Need for affordable Assisted Living
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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)
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
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).
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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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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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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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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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
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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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
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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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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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)
A Brief Tour of Pathway Senior Living’s
Affordable Assisted Living Portfolio
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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
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Making The Case For Alternate
Financing With Low Income
Housing Tax Credits
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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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
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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
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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
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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
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
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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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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