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 Survey Finds New Construction Gains In Assisted Living, Alzheimer Segments

Investment banking experts Lancaster Pollard recently released a survey of 300 seniors housing leaders that showed a healthy appetite for new construction and renovation projects, particularly in regard to assisted living and Alzheimer’s disease/memory care (AD/MC).

Steve Kennedy, senior managing director for the investment banker, says the survey seeks to move beyond one segment of the market by providing a statistically significant survey from a group of owner-operators that include both for-profit and nonprofit, and smaller and larger, multisite operators.

“And so inevitably you don’t expect to see too much material change across the entire survey results from year to year, but there were certainly some responses that caught our eye,” he says. “The first was the continued projection of new construction projects at facilities. A majority of the respondents stated that they do plan to pursue a construction project in 2017, whether it is extremely likely or somewhat likely, and that was a little bit higher than 2016, at 75 percent.”

This is a little bit surprising given that interest rates are starting to increase, Kennedy says. “Bank construction lending has become a little bit more tight, and we are starting to see not only wage and labor pressures in operations of facilities, which affect their pro-forma financials, but also construction cost pressure increasing in certain subcategories,” he says.

In breaking down the results, the survey said 62 percent of respondents believe that the AD/MC market will experience the most growth in the coming year. Statistically, this is no different than the response in 2016.

Interestingly, 22 percent of those responding said they are extremely likely or somewhat likely to attempt to sell a facility in 2017, marking a sharp drop from the 2016 measures, which saw 65 percent of respondents extremely likely or somewhat likely that they would try and sell a building.

“Further, 43 percent of respondents stated that they are extremely likely or somewhat likely to pursue an acquisition project. When we asked this question last year, 53 percent of respondents said they were likely to pursue an acquisition project in the coming year,” the survey said.

And, finally Lancaster Pollard asked what the optimal annual capital expenditure level would be to maintain their organization’s competitive market position in 2017. In response, 36 percent of the seniors housing leaders chose $551/bed and higher as the most selected answer. “Twenty-one percent of respondents estimate it costs $351 to $450/bed to maintain their organization’s competitive market position. This aligns with our 2016 survey results,” Kennedy says.

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