As the new majority shareholder of CRL Senior Living Communities, Ari Weinberger has set his sights on the Chicago market, where he hopes to expand the firm’s footprint with need-driven, memory care centers.
Weinberger joined CRL in 2009 as president and helped oversee a rapid expansion for the firm. Since 2008 it has constructed and acquired a total of 10 facilities. In June, he and Chairman Douglas Cameron became the firm’s largest shareholders and decided to put a growth plan in place for the Chicago area.
CRL operates 16 independent and assisted living facilities in the Midwest, with the majority of them in Wisconsin. When Weinberger invested in the firm it only had one location in Illinois, located in exurban McHenry County.
That is changing as Weinberger has already put in play an aggressive expansion into the Chicago market.
Recently, the firm completed the construction of a second location in Illinois. North Grove Manor Alzheimer’s/Memory Care and Assisted Living is a $20 million, 112-bed facility in Morton Grove. CRL is also currently in the pre-construction phase of a similar project in Highland Park and it has acquired properties in Naperville and Palatine for future memory care centers.
In the past, CRL has financed ground-up projects on a sale/leaseback basis with entities like Healthcare REIT, but moving forward Weinberger says that the firm is a in a position to self-finance certain high acuity developments such as memory care facilities. While he is not opposed to expanding the firm’s independent housing market, he deems it too costly to engage in new construction at this time for lower acuity projects.
“We are looking to grow in the assisted and independent market, but we are not willing to build,” says Weinberger. “We will acquire and reshape underperforming properties, but that is still a tough environment. Sellers and buyers are not always in agreement today.”
The senior housing business is generally seen as a strong performer in the current environment, but when broken down by product offering, certain segments are outperforming others. Higher acuity facilities, those supplying skilled nursing and memory care services, are in demand, while independent living has become a tougher sell.
According to the National Investment Center for the Seniors Housing & Care Industry, the occupancy rate for independent living properties in 2Q11 was 87.7 percent, assisted living was at 88.5 percent, and nursing care was at 88.4 percent. Annual rent growth for nursing care is at 3.3 percent, while independent facilities stand at 1.4 percent.
While there may not be a major discrepancy in the occupancy numbers, the near-term growth for independent facilities is still in question. The poor housing market has cut into the independent and assisted living environment as active seniors are unable to sell their homes for the desired amount to help subsidize a move to a retirement community.
Weinberger also warns against relying too much on aging demographics. The average age of a resident of an independent or assisted living facility is 85. While many analysts tout the Baby Boom generation as a windfall for the industry, the majority of Boomers are still more than 20 years away from considering making the move to a senior living facility.
Yet the demand for need-driven facilities is growing. With the increase in average life expectancy, the chances for elderly people to develop conditions such as dementia and Alzheimer’s also increase.
“People over the age of 80 have a more than 50 percent chance of having memory issues,” says Weinberger.
At some point, it becomes a safety issues and families will take the step to move a parent or loved-one to a managed care facility.