Without a doubt the seniors housing industry during the last 12 months experienced its most dynamic growth period. In fact, seniors housing owners and managers are literally basking in the newfound spotlight being shed on this real estate segment, with headlines screaming, "Pay attention, seniors housing is hot!"
Nowhere is the sheer growth of this industry more evident than in the ASHA 25 lists of the largest 25 owners and managers of market-rate seniors housing properties. Since 1994, National Real Estate Investor has partnered with ASHA to produce these definitive lists of the largest movers and shakers in the industry, but in 1997, the list has added importance as more entities look to this industry as an ever-attractive investment play.
Why? Perhaps the graying of America that has been so heralded over the past few years has finally taken hold of investors' hearts and funding accounts. Or perhaps it's just part of the ever-growing need to become bigger in an age of real estate plenty. Whatever the reason, financing sources of all shapes and kinds are lining up to pump money into the industry. And there is no question the public markets have become a major force in shaping the future of seniors housing, as they have with other forms of commercial real estate. This funding mechanism is opening many doors for seniors owners and managers alike, and is driving growth across the continuum of seniors care, from senior apartments, through assisted living properties and continuing care retirement communities (CCRCs).
In sum, the message appears to be, "If you stand still or drive in the slow lane, you will be passed."
HISTORICAL PERSPECTIVE One thing that has been clear in working on these lists for the past four years is that overall, placements and displacements from the lists have been fairly modest, as companies naturally grow by acquisition and development or downsize through divestiture of assets.
In 1994, for example, Colson & Colson/Holiday Retirement Corp. topped both the owner and manager lists, but with 14,741 units owned in 126 properties and 15,660 units managed in 133 communities. The top five read this way:
1. Colson & Colson/Holiday Retirement Corp. 2. Evangelical Lutheran Good Samaritan Society 3. Forum Group Inc. 4. Marriott Senior Living Services 5. Leisure Centers Inc.
In 1995, the second year we produced the ASHA 25 survey, the familiar Holiday Retirement Corp./Colson & Colson topped the ownership chart again. Forum Group moved to No. 2, followed by Marriott Senior Living at No. 3, Adult Communities Total Services at No. 4, Evangelical Lutheran at No. 5., and Leisure Centers came in at No. 6. On the management front, Holiday topped all comers, but the biggest jump was made by Insignia Financial Group, from No. 21 on 1994's management list to No. 4.
Just last year, the 1996 list showed once again Holiday Retirement Corp. topping both lists, but new entrants in ownership included Emeritus Corp. at No. 9 and Living Centers of America debuting at No. 5. On the managers list, newly renamed ACTS Inc. debuted at No. 7, with other new entrants Living Centers of America at No. 8, Emeritus at No. 11, Retirement Management Corp. at No. 12 and Capital Senior Living at No. 13.
PRESENT DAY: OWNERS Today's list sees Colson & Colson/Holiday Retirement grow to a whopping 21,465 units owned in 177 properties, as it maintains its huge differential over No. 2 Emeritus. But the big news for Emeritus is that the company more than doubled its number of total owned units in the past year, primarily through development.
What is most evident from this list are the many new entrants, at No. 4 (Host Marriott), No. 8 (Meditrust), No. 12 (Senior Lifestyle Corp.), No. 18 (Sun Bridge Assisted Living), No. 24 (Assisted Living Concepts) and No. 25 (Fountains Retirement Communities).
The public markets are exerting tremendous influence over the seniors housing industry. Host Marriott is a huge publicly traded company best known for acquiring luxury hotel properties and utilizing its companion company, Marriott International, for property management of its newly acquired assets. Host Marriott entered the seniors housing game in earnest earlier this year with its $433 million acquisition of The Forum Group, and Marriott Senior Living Services will manage the 6,127 units in 11 states under the Marriott brand name.
Meditrust is a major publicly traded real estate investment trust (REIT), and enters the ASHA owners list as the eighth-largest owner of seniors housing units in the country.
Other REITs, including Nationwide Health Properties (No. 3), Health and Retirement Properties Trust (No. 9) and Health Care Property Investors (No. 11), have experienced substantial upward moves on the owners list. In fact, Health and Retirement Properties Trust was the only REIT to rank on the 1995 ASHA owners list.
"This is a pretty substantial trend," says David Schless, ASHA's executive director. "Five years ago these REITs were primarily focused on SNFs and other health care properties, and now they are among the most substantial owners in the business."
Other movers on the owners list include ARV Assisted Living, which grew its portfolio but was pushed back by other upward movers. Grand Court Lifestyles (formerly Leisure Centers) saw substantial growth, through both development and acquisition activity to move from No. 8 to No. 7.
ACTS stayed level in ownership units, but saw a drop of six places to No. 10. "This is a noticeable trend," says Schless. "A number of non-profits have dropped because of limited growth vis-a-vis tremendous growth from other companies."
Senior Lifestyle Corp., a Chicago-based firm, enters the owners list at No. 12, which reflects one of the most significant deals in recent times with its acquisition, through Goldman, Sachs' Whitehall Fund, of the Integrated Living Communities portfolio. The firm has also been an active developer.
Freedom Group, a continuing care retirement community company, added capacity and moved up from No. 22 to No. 13.
Evangelical Lutheran Good Samaritan Society, another major non-profit firm which first appeared as No. 2 on ASHA's 1994 list, divested some of its market-rate seniors housing properties in the last year, but still, like other non-profits, has a massive portfolio of Section 202 housing and nursing homes. These units are not reflected in the ASHA survey since all federally assisted housing programs like Section 202 housing are excluded from its survey of market-rate units.
Alternative Living Services' numbers rank it No. 16 among owners, but they do not reflect its recent acquisition of Sterling House, which added some 3,000 units. "They're a likely candidate to appear in the top five next year," says Schless.
New entrant Sun Bridge Assisted Living is a large division of Sun Healthcare, a major publicly held nursing home company based in Albuquerque, N.M. It experienced substantial growth, partly from development but more specifically from the acquisition of Retirement Care Associates.
Likewise, Sunrise Assisted Living saw substantial growth from 1,873 units in 23 properties to 3,701 units in 42 properties.
The next three listings are non-profits -- Covenant Retirement Communities, National Benevolent Association and Retirement Housing Foundation -- which remained level in the number of market-rate units owned, but were simply pushed back on the list by the growth of other firms.
New entrants Assisted Living Concepts and Fountains Retirement Communities, Inc., at Nos. 24 and 25, respectively, both saw big growth and bear watching in the future.
MANAGER STORIES As with the owners list, one of the biggest stories on the 1997 ASHA 25 managers list is the number of new entrants. These new management firms include Fountains Retirement Communities at No. 14, Sunrise Assisted Living at No. 16, Alternative Living Services at No. 17, Sun Bridge Assisted Living at No. 19, and Assisted Living Concepts at No. 25.
Another obvious change on the managers list is the narrowed size of the gap between No. 1 Colson & Colson/Holiday Retirement Corp. and No. 2. This year's No. 2, Professional Community Management (PCM), manages Leisure World condominium properties for seniors in Southern California, and enters the list at No. 2 primarily due to definitional adjustments to the ASHA survey. ASHA changed the definition of seniors housing in order to be consistent with recent changes made to the Fair Housing Amendments Act relative to housing for older persons.
Big movers on the managers list abounded, including Emeritus Corp., which nearly doubled its portfolio, up from No. 11 to No. 5. In fact, Emeritus, ARV and Grand Court Lifestyles made major moves on the management list thanks to growth by acquisition or portfolio growth, which are trends similar to those on the ownership side of the ASHA survey.
Senior Lifestyle Corp. and Advocat are new entrants at No. 8 and No. 9. Advocat is a public long-term care company with a portfolio of nursing homes, as well as seniors housing and assisted living units. Its numbers reflect capacity added to existing long-term care facilities, which appears to be a major trend in the long-term care industry, particularly where these facilities have additional wing capacity in conjunction with their licensed nursing beds.
"You're clearly seeing long-term care companies, or companies that historically did not get involved in the 'housing' end of things, adding this capacity," says Schless.
As with the owners list, the non-profits experienced a fall off, with Evangelical Lutheran dropping from No. 6 to No. 12. Similarly, Covenant Retirement Communities, National Benevolent Association and Retirement Housing Foundation stayed level in their managed unit count but lost ground to new ASHA 25 entrants.
Will the dynamics of new entrants and public companies continue to change the face of the seniors housing industry? Only time will tell, but the force of the public markets and the high-speed train that is the seniors housing industry today appears to be heading for much more growth of capacity in assisted living and CCRC properties in particular. Other factors including the growth of managed care and changing government regulations will continue to impact the ASHA top 25 lists in the years ahead. Stay tuned.
All data and research compiled by American Seniors Housing Association