Assisted living remained last year's hot property in the senior housing industry, and its popularity on Wall Street drew more investor attention to the entire sector.
Hospital systems and nursing home chains that operate continuing-care retirement communities kept adding assisted-living units throughout last year, according to MODERN HEALTHCARE's 1997 Multi-unit Providers Survey.
CCRCs allow residents to "age in place," moving from one level of care to another as their needs change. They offer congregate- and assisted-living options in addition to skilled-nursing care.
The 75 responding systems with CCRCs showed a 41% increase in the number of their assisted-living units for 1996. The respondents operated 19,058 assisted-living units in 1996, compared with 13,542 in 1995.
By contrast, the 74 respondents to last year's survey reported only a 12.8% increase in the number of their assisted-living units.
The systems expanded their holdings in other senior housing options but not as dramatically.
The respondents increased their total number of CCRCs by 14% to 504 in 1996, compared with 441 in the previous year.
They also upped the number of their skilled-nursing beds that serve CCRCs by 9% to 22,018 and the number of their independent-living units by 5% to 45,283.
Among the 10 largest systems with CCRCs, the top three remained unchanged from last year's survey rankings.
Not-for-profit Evangelical Lutheran Good Samaritan Society, based in Sioux Falls, S.D., ended 1996 with 72 CCRCs, compared with 57 in the previous year. During 1996, the society launched a major assisted-living initiative, screening more than 30 communities as possible sites for future housing developments. The society increased its number of assisted-living beds 7% last year to 724 from 676 in 1995 and plans to build more facilities this year.
The society has held onto its No. 1 position with a 41% lead over the next largest player, Des Moines, Iowa-based Life Care Services Corp., which had 51 CCRCs at the end of 1996. It added 25 assisted-living beds in 1996, bringing its total to 641.
The No. 3 company, Fort Smith, Ark.-based Beverly Enterprises, added only three CCRCs in 1996, bringing its total to 33. But it increased its assisted-living beds by 26% to 413 in 1996 from 329 in 1995.
Encore Senior Living of Portland, Ore., made its debut on the list this year in the No. 8 slot. Encore was formed at the end of 1996, when Portland-based Brim split its healthcare and assisted-living businesses. The assisted-living business was merged into the newly formed Encore, controlled by former Brim executives and Chicago's Pritzker family, which owns the Hyatt hotel chain. Encore was operating 17 CCRCs by the end of 1996.
The responding systems' strong forays into assisted living may be tempered by the momentum of for-profit companies that specialize in assisted living, a number of which took advantage of their trendiness and launched high-profile initial public offerings in 1996.
A total of 14 assisted-living specialty companies are now publicly traded. The largest assisted-living company, Sunrise Assisted Living, brought in $82.5 million from its stock offering in May 1996. Among other offerings, Louisville, Ky.-based Vencor spun off its assisted-living subsidiary, Atria Communities, in a $50 million issue in August 1996, holding onto a 65% interest. Similarly, Owings Mills, Md.-based Integrated Health Services spun off all but a 37% stake in its assisted-living subsidiary, Integrated Living Communities, raising $33.6 million in October 1996.
But at the same time these companies may be competing with CCRCs, Wall Street's enthusiastic response to their IPOs points to a larger move toward what some have called a "maturation" of the senior-housing industry that may work to the benefit of all operators.
In the past, the senior-housing industry has been viewed as embryonic, out of touch with seniors' needs and highly fragmented. But now, potential investors look at the country's aging population and companies' efforts to consolidate and offer a range of housing options as signs that the industry is headed into a growth phase.
The bullish outlook is reflected in the emergence of new capital sources for the industry. Besides the equity market, institutional investors, such as life insurance companies and pension funds, have started adding senior housing projects to their portfolios.
Analysts say these sources will be crucial for the industry to meet its estimated $400 billion in capital needs over the next 35 years.