Nonprofit operates affordable, luxury products while seeking new middle-income models
By Jeff Shaw
Managing Editor
Affordability is a big challenge facing the seniors housing industry, and that challenge can’t be solved by affordable housing projects alone, according to John Cochrane, president and CEO of be.group, a California-based nonprofit operator.
The company serves the low-income seniors population with its government-subsidized communities. But middle-class seniors are getting lost in the shuffle, he believes.
“We’re very good at serving the low-income folks with government-subsidized properties. We’re very good at serving the higher end of the marketplace. The group we as an industry are not serving is the 60 percent of people between those two,” says Cochrane. “The majority can’t find what they’re looking for.”
Based in the Los Angeles suburb of Glendale, be.group owns and operates nearly $500 million in seniors housing assets. The company’s 34 communities, 27 of which are affordable, serve 4,000 residents throughout California. The company’s assets include continuing care retirement communities (CCRCs), assisted living and HUD-subsidized affordable housing for very-low-income seniors.
The portfolio is about to grow significantly. Last July, be.group and American Baptist Homes of the West (ABHOW) announced that they planned to affiliate (the nonprofit equivalent of a merger). The deal still requires approval from the California Attorney General and the Department of Social Services of California. As of presstime, the deal was expected to close in late April or early May.
The affiliation will result in a combined enterprise of nearly $1.5 billion in seniors housing assets, serving 10,000 older adults via 82 communities across five states.
Bridging the affordability gap
The affordable seniors housing projects be.group manages are already in extremely high demand. The properties all have 100 percent occupancy and an average waiting list of three to five years or longer, depending on the location of the community. Most waiting lists over seven years are closed because “longer would be ludicrous,” according to Cochrane. There’s no lack of demand for the product.
“We can’t begin to meet this demand for subsidized housing currently,” says Cochrane. “We need to find a funding solution for the development and subsidizing of low-income housing.”
The challenge isn’t even just a matter of keeping housing affordable, adds Cochrane. Keeping seniors in their proper place on the continuum of care can help prevent health problems before they begin.
“Putting people into safe, affordable housing can reduce the impact on the community as a whole for providing healthcare,” says Cochrane. “We know this is a beneficial use of government money. We just need to find a vehicle for expanding the delivery.”
Like most affordable housing developers, be.group uses low-income housing tax credits and other government programs to fund its projects.
The company’s properties are examples of how far affordable seniors housing has come. No longer the nondescript, dilapidated high-rises, many affordable projects are now indistinguishable from high-quality, market-rate housing.
“Unless they know it’s affordable housing, none of the nearby residents have any idea. You can’t tell the difference, and that’s the way it should be,” says Cochrane. “We’re really proud of them. They’re wonderful properties.”
In addition to expanding service to the low-income population, be.group is seeking new, innovative ways to serve middle-class residents — the “60 percent” of seniors Cochrane mentioned who don’t qualify for subsidies, but can’t afford the luxury product. So far, no developer has discovered the secret to tailoring seniors housing for this market.
“We haven’t seen a solution for the schoolteachers and firefighters so they could retire with confidence,” says Cochrane. “We’re going to have to be really creative to find reasonable living that stays within the income of the retired plumbers out there.”
Some companies have pursued innovative solutions, such as a “CCRC without walls” concept that allows services to be offered outside the walls of the community. Unfortunately, none of these ideas have had a significant impact on the market, says Cochrane. They’re either too expensive or too difficult to scale up.
“I haven’t seen much that’s successful or scalable. We don’t yet know what that middle-class housing will look like — nobody does,” says Cochrane. “But everyone recognizes what a large and dynamic opportunity that is.”
The company is currently researching new models to help this underserved seniors population.
Marketing lifestyle, not healthcare
In addition to finding new customers in underserved demographics, the seniors housing industry needs to do a better job of selling itself to the current customer base, according to Cochrane.
Too often, seniors housing com-munities are perceived as healthcare facilities rather than positive lifestyle choices. Instead of focusing on those healthcare aspects of seniors housing, marketers should show potential residents how their life would improve by living there, he emphasizes.
“Most of what I see in the seniors marketplace is still healthcare-delivery focused, which only serves a tiny part of the market with a healthcare event,” says Cochrane. “We’re looking to help people prevent or defer those health events and live both longer and better.”
Cochrane notes what a lot of top operators likely hear from residents — that they’re thrilled with the decision to move into seniors housing, and that they wish they had done it sooner. So how does the industry start convincing people to make the decision earlier?
The company not only offers wellness programs, physical activities, educational programs and volunteering programs, but it also measures and tracks the results. Once a measurable statistic is achieved, that stat can be used to demonstrate the value of seniors housing to the market.
Examples of measurable improvements include fall prevention, appropriate use of medicine and improved nutrition. All the outcomes are improved through on-site services like fitness, staff doctors and nurses, and nutrition counseling.
“We’re not simply here to serve someone with a health condition. We’re here to help seniors have the life they’ve been working for their whole lives,” says Cochrane. “We need to tell the story of how we can help people age well. That will change how we’re received in the marketplace.”
One of the reasons Cochrane is excited for the upcoming ABHOW affiliation is the company’s use of Masterpiece Living, a third-party program for improving health in seniors housing communities. Masterpiece allows communities to track and report the lifestyle effects of exercise, nutrition and other aspects of seniors housing.
“It’s not just ‘here’s a wellness program, and we hope you do well,’” says Cochrane. “It allows [ABHOW] to get baseline measurements on a resident’s lifestyle, and then take action to improve his or her outcome. Residents can see how they influence the way they live.”
Building a new company
Although be.group built its portfolio mostly through development, the company plans to grow more through affiliations in the future. The company previously grew via 75 percent development and 25 percent through affiliations, Cochrane estimates, but those numbers will be reversed moving forward.
“We will still continue with some development, but our principal growth will be through affiliations,” says Cochrane.
The ABHOW transaction was a long time coming. Discussions began five years ago, as the two organizations seemed a natural fit — both faith-based, nonprofit operators headquartered in California with a similar mission to serve seniors.
Ultimately, the companies chose not to move forward with the transaction. ABHOW decided it needed to finish building some developments already in progress while be.group was in the midst of some turnaround projects within its portfolio.
“About a year ago, we reopened those discussions,” says Cochrane. “We came to the conclusion that it was very much the right time.”
The affiliation will allow the new company to leverage its combined size and strength in order to most easily spread its message and reach more seniors in the Western United States.
“We have to compete with the for-profits and in our marketplace,” says Cochrane. “We know we’re competing in an era of changing consumer expectations. We need to amplify our mission to the greatest degree possible. We need the benefits that scale brings.”
When the affiliation between the two nonprofit entities is completed, the combined company will be reorganized.
Two companies will be used as new holding companies. California Life Plan Communities will hold the CCRCs located in California in the combined portfolio. Due to the complicated regulations governing CCRCs in the state, the California communities needed to be clustered under that company, says Cochrane. The rest of the portfolio, including the CCRCs outside of California, will organize under a different holding company known as Cornerstone Affiliates.
Both be.group and ABHOW will continue to exist, but as subsidiaries of California Life Plan Communities. The companies will remain nonprofit, which enhances their ability to serve the very-low-income segment of the senior market.
“At the core, the difference between nonprofit and for-profit is a matter of motivation,” says Cochrane. “We are not concerned with serving the needs of an investment community. We’re about amplifying our mission. Every surplus we make goes back into the mission of our organization.”