The greying of America is causing the building and development industry to rethink its demographics. The very same group that caused the post-World War II homebuilding boom is creating another. GI Joe and Rosie the Riveter are not only living longer, but they are often in good enough health to postpone entry into the dreaded nursing home. Although they may no longer be able to live independently they can benefit from a residence in which they receive help with the daily tasks of living. Assisted living residences are the perfect bridge between independence and nursing home or acute care.

Assisted living residences can be free-standing buildings or housed with other residential options such as independent living or nursing care. They can be operated by nonprofit or for-profit companies. Usually they are between 25 and 120 units varying from one room to a full apartment. But what they really are is one of the fastest growing housing markets since the boomers hit the housing market in the seventies. Assisted living residences are a $12-15 billion per year industry, expected to double by the year 2000.

Cashing in on the trend are development and management companies that are creating and running new assisted living residences across the country. No longer the domain of the sunshine states such as Florida, Arizona and California, assisted living residences are springing up nationwide.

Bob Halpin, CEO of Aureus Group, LLC. has recently formed a strategic partnership with Marriott Corporation to develop new assisted living communities in an undisclosed number of markets on a national scale. Although the relationship is not exclusive, leaving open the possibility of other agreements, AG will own, develop and build the structures and upon completion of the units, the Marriott Assisted Living management team will step in to manage the properties. Halpin, a successful developer of commercial real estate, said, "This way everyone is doing what they do best. We will build the facilities and Marriott will operate them."

From a business perspective, assisted living residences make a lot of sense as an investment risk. As managed healthcare becomes more pervasive, the industry will try to do what it can to drive costs down. For a resident who must choose between the options of assisted living and a nursing home, the cost of living is as much as 25% greater in a nursing home. Managed care companies are wanting customers to go to assisted living to save money. Second, the facilities are encouraged to provide a better environment for those between independence and acute care, which is attractive to seniors who wish to retain a sense of dignity and independence a while longer.

According to Halpin, the facilities themselves are also less costly to build than office buildings or even apartments as residents have no need for kitchens, and common rooms such as the main dining room and recreational areas can be built at a relatively low cost per square foot. In terms of site acquisition, construction, development and building, assisted living residences are a less complicated project than other industrial, commercial or residential projects.

Although certain states seem to cater to elderly retirement more than others, facilities such as these are needed everywhere in every municipality. If an average of 100 units or less are built, that does not require a huge market to fill. Since the average resident remains on average about 28 months, it is a good market for rentals or individual ownership.

In many cases, acute care is available nearby in the same location or an adjoining facility, relieving family members of the stress of finding a new facility in the event of a rapid decline or onset of incapacitation.

"I think the demand for this kind of product will increase over time. Demand is already ahead of the supply. It is a very big opportunity, but the key satisfaction is in supplying a product that people really need," adds Halpin.

Published: January 14, 1998

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