Memory Care facilities are specially designed residential healthcare complexes that come under the overall umbrella of Senior Housing. Senior Housing includes the three major sub categories of independent living, assisted living and skilled nursing facilities. The distinguishing factor between these different types of housing for elderly residents is the level of care and assistance which is provided. This ranges from independent living, which offers residents a safe environment to live but with no care, up to specialist nursing homes that provide a high level of 24-hour care. Memory Care facilities fit somewhere along this spectrum, offering specialist care designed specifically for elderly Americans suffering from Dementia
Demand for Memory Care
Dementia is the general term used to describe memory related diseases, the most common form of which is Alzheimer’s, accounting for 60-80 percent of all dementia sufferers. 11% of over 65 year olds and over 30% of over 85 year olds suffer from Alzheimer’s, which amounts to a total of 5.4 million throughout the US. This demographic makes up the majority of the demand pool for residency in Memory Care facilities.
As the statistics show, Dementia becomes more prevalent as age increases. Therefore, the two biggest factors which effect the spread of dementia and hence the demand for Memory Care is, a) the volume of people who are moving into their old age and b) the length of time that people are living.
During the baby boomer years of 1946-1964, there was an extraordinary 76 million births in the US. This generation are now aged between 53 and 71 and with the addition of immigrants, now represent nearly a quarter of the entire US population. The baby boomers are moving into the age where a significant portion of them will make up the demand pool for Memory Care. Forecasts have suggested that by 2050 the number of people with Alzheimer’s in the US will increase drastically to 13.5 million.
The other factor that will widen the Memory Care demand pool in the coming years is the increasing life expectancy for US citizens. The estimated life expectancy in the US for 2017 is 79.13 compared to 76.8 at the beginning of the millennium. This dramatic rise in the length that people are living, largely down to technological advances in medicine, will mean that residents’ stay in Memory Care facilities will be significantly increased.
Benefits of Memory Care
Traditionally, elderly sufferers of Alzheimer’s have been treated in regular nursing homes in separate designated Memory Care wings. Stand-alone Memory Care differs in the fact that they cater exclusively for people with Alzheimer’s and therefore the whole facility can be tailor made for the needs of memory loss residents.
Special features of memory care facilities include; a high staff to resident ratio, a secure environment with no “dead ends”, specially designed technology such as sensory-based programming, colour-coded hallways, and expertise in treating residents at all stages of the disease.
Given these specialised features, Memory Care facilities are able to offer their residents a much higher quality of care than Assisted Living facilities. For this reason, Memory Care facilities have seen marked improvements in care in terms of fewer falls, fewer emergency visits, better nutrition, better social interaction and independence and improvements in maintaining mental functioning.
Investing in Memory Care
Memory Care facilities have been around for some time but only really started to pick up popularity amongst investors in 2004 with the publishing of the NIC Map by the National Investment Center for Seniors Housing & Care (NIC). This map contains data which is collected monthly from the majority of Senior Living homes across the US and includes information such as occupancy levels, absorption rates, rents/rent growths and inventory/construction. With the publishing of all this data, the market suddenly opened up for investors and operators as transparency in the market place became available.
By analysing the NIC figures, investors noticed the potential for growth in the Memory Care market. It became obvious that there was a huge gap in the market relative to the upcoming surges in demand which are anticipated due to the demographic changes mentioned earlier. These increases in demand will serve to increase purchase prices on these facilities as an increased demand denotes a decrease in risk and hence investors will be willing to purchase at a higher price. In investment terms, the increases in demand will cause a decrease in cap rates.
Now is therefore the opportune time to invest in this product before the baby boomer generation really causes a surge in demand and drives the purchasing prices of the facilities up. With the falling cap rates that are expected to come over the next few years, investors in Memory care will see the value of their facilities rise and therefore realise a nice profit if sold when demand is at its highest.
The other big advantage of investing in Memory Care is that it is fairly resilient against economic downturn compared to other asset classes. This was evidenced during the 2008 global recession when senior living in general experienced much smaller occupancy rent swings than multifamily, retail and office.
One possible stumbling block for investors in Memory Care is the high barriers to entry into the market. Memory Care Facilities must be built with a specific architectural design to accommodate the needs of its residents. This as well as a high ratio of specialised nurses to residents and specially designed remote monitoring technology means that entering the Memory Care market is difficult and costly.
However, the potential for return on investment is encouraging investors to continue to develop to try and keep pace with the demand. Brookdale who currently own over 1,100 facilities, has expanded its portfolio of Memory Care centres to over 100. Silverado Senior Living, another leader in the industry is also expanding its portfolio as well as incorporating unique sensory technology into its facilities to keep ahead of its competitors.
Despite the big health care providers expanding their memory care portfolios there is still plenty of room left in the market for newcomers provided that they can overcome the high entry barriers. The gap between supply and demand for Memory Care beds is still wide and given the further forecasted increases in demand, now would be an ideal time to invest and ride the downward wave of Memory Care cap rates.