LKC School of Business Singapore Management University

Dean Benedict Koh Director Centre for Silver Security

Challenges and Opportunities in Setting Up Retirement

Villages in Asia David P Collins

Managing Partner

Active Living international

5 July 2013

U.S. Experience

• Communities cost about $25 million

• 70-100 units

• 2-3 years to open

• 1.3 years to full occupancy

Need Driven Sectors

• Higher acuity assisted living

• Memory care

• Less dependent upon home sales

• Less able to defer the decision

• Increases in revenues scale with care dependencies

New Communities are Built Based on

• Age Demographics such as an aging parent and their children and grandchildren

• Economic factors encouraging developer investment

• Density of existing supply

• Availability of land on long term lease

Community Amenities • Scheduled transportation • Emergency

communication system • Housekeeping and

laundry • Main Lobby/ Reception • Dining Options • Billiards/ Games • Indoor Pool • Fitness Center • Yoga Studio • Spa

• Card Room • Resident Services • Computer Lab • Mahjong • Mail Room • Movie Theater • Library • Multi-Purpose/ Ballroom • Crafts • Physical Therapy • Lawn bowls

Health and Wellness Amenities

• Blood Pressure Checks

• Annual Flu Shots

• Weight Monitoring

• Assessment as Needed

• Dietary Guidance

• Water Aerobics

• Individualized care services

• Pilates

• Tai Chi

• Yoga

• Strength Training

• Meditation

• Health Lectures

• Wellness Information and Advice

Add Value

• Base rent

• Community fees

• Care fees

• Services for scheduled needs

• Services for unscheduled needs

Continuing Care Retirement Communities

• A CCRC is a life care community. When a need arises, residents have access to a full continuum of health and medical care, on-site rehabilitation services, memory care support, skilled nursing care, and assisted living.

• With life care benefits, monthly fees remain predictable.

The Clare Chicago http://www.theclareatwatertower.com/

Universal Design • Space to place objects • Accessible appliances • Drawer pulls, not knobs • Wheelchair turning radius

Accessibility requirements equal larger bathrooms Larger bathrooms require additional lighting over shower and bath

CCRC Segovia

Where Does the Money Come From?

• Insurance

• Pensions

• Savings

• Government plans

• Sale of Real Estate

Payment Methods

Entrance Fee

Refundable Portion

Amortized Portion

Monthly Fee

100% Plan

$349,500

$349,500

--

$4,430

50% Plan

$349,500

$174,750

$174,750

$3,323

0% Plan

$349,500

--

$349,500

$2,437

Without the Amortized Entrance Fee

Style Square Meters Monthly Fees in U.S.dollars

Studio 49 $3,700

1 Bed/ 1 Bath 83 $4,400

2 Bed/ 2 Bath 130 $6,500

Segovia Floor Plan

Retirement Community Freemont, California

2012 Annual Rate U.S.D.

Semi-Private Room

$81,030

Private Room

$90,520

Assisted Living

Communities

$42,600

Home Health Aide

$21,840

Home Maker $20,800

Adult Daily Services

$18,200

Nursing Homes

Home Care

Assisted Living Communities

$42,600

Adult Day Services $18,200

Expense Ratios U.S.

• 150 units

Benchmark cost of an average unit $132,000

Renting at $1,125 monthly

93% stabilized occupancy

Operating Expenses Per Resident/Per Day

• Range from $42 to $63 for Independent Living

and $80 to $108 for Assisted Living

Independent Living

• Expense Ratio

55 to 70 %

• Profit Margin

30 to 45 %

Assisted Living

• Expense Ratio

65 to 75 %

• Profit Margin

25 to 35 %

•Management fees range from 5 to 7% of revenue

Annual Operating Expense

• 93% occupancy

• 140 units X 365 days

• 51,000 resident days X operating expense per resident per day

Average Assisted Living Base Rate for Alzheimer’s and Dementia care

$4,807 Monthly

$57,684 Annually

Method of Security for Alzheimer's/Dementia Care in Assisted Living Communities

Locked unit 78%

Unlocked, but doors arealarmed 11%

Residents wear monitors6%

Other/none 5%

Alzheimer’s and Dementia Care

Private Room Semi-Private Room

$261 Daily $230 Daily

$95,265 Annually $83,950 Annually

Average Nursing Home Room Rate for Alzheimer’s and Dementia Care

Security for Separate Alzheimer's/Dementia Wings in Nursing Homes

Locked unit 83%

Unlocked, but doors arealarmed 9%

Residents wear monitors7%

Other/none 1%

Physical Connection to Hospital of Assisted Living Community

Freestanding 86%

Connected to assistedliving community 9%

Connectedto hospital 5%

Connectedto bothhospital and assistedliving community

Nursing Homes Typically Include:

• Room and meals

• Nursing care

• Medication management

• Personal care (assistance with ADLs)

• Social and recreational activities

Assisted Living Communities: Physical Connection to Hospital or Nursing Home

Freestanding 79%

Connected to nursinghome 19%

Connected to Hospital 1%

Connected to bothhospital and nursing home1%

Adult Day Services Model

Average: $71 (both medicaland social 44%)

Average: $79 (medical23%)

Average: $63 (social 33%)

Adult Day Services: Physical Connection to Hospital, Nursing Home, or Assisted Living Community

Freestanding 71%

Connected to nursing home11%

Connected to assisted livingcommunity 8%

connected to both assistedliving community andnursing home 6%

Connected to hospital 2%

Connected to hospital andnursing home 1%

Additional Services Provided at Adult Day Services Centers

0% 20% 40% 60% 80% 100%

Incontinence services 94%

Nurse on staff 85%

Dispense medication 85%

Wound care 60%

Respite services 59%

Rehabilitation services 38%

We All Know the One Child Policy

China’s One Child Policy

• Created by the government in 1978 to alleviate social, economic, and environmental problems.

• The policy has prevented more than 250 million births between 1980 and 2000

• Four hundred million births over all through 2011

What Contributed to the Policy

Catastrophic Implications

What are the Biggest Challenges for Singapore’s Retirement Industry?

• Cultural acceptance

• Financial capability of Seniors

• Regulations

• Poor performance of established projects

• Availability of land

The Challenge? Communications

The best time for seniors to consider a senior living community is before it’s needed–while the choice is still theirs, while they can get the most out of a whole new world of activities and opportunities, and while future health care services can be arranged.

A GROWN-UP CONVERSATION BETWEEN CHILDREN AND THEIR

AGING PARENTS

• Parents do their best to help their children make smart decisions, live a good, productive life. A time comes to return the favor and have an open discussion about making informed decisions about senior living options available, and to discuss the next stage of life

ECON’s All New Medicare Centre

and Nursing Home in Taman

Perling, Johor Bahru

Projected Growth for Other Country’s Retirement Industry

• China

• Thailand

• Japan

• Malaysia

• Indonesia

• Singapore

55%

7.5%

9.3%

7.4%

3.7%

?

Birth Rates

• Replacement Rates 2.1

U.S. 2.0

Germany 1.4

• Singapore

Chinese 1.08

Indians 1.09

Maylays 1.64

* Each successive generation of Singaporeans will halve in the next 18-20 years

Demographics SINGAPORE MALAYSIA

Population Approximately 5.5 million Approximately 26.5 million

65 Years and Over 8.1% 5.3%

Median Age 33.6 years 27.4 years

Population Growth Rate Nearly 2% 1.5%

Life Expectancy at Birth 84.07 years 74.28 years

Health Expenditures 4% of GDP 4.4% of GDP

Hospital Bed Density 3.14 beds/ 1,000 population

1.8 beds/ 1,000 population

Singapore

2011

•7 Adults supported 1 retiree

2030 •2.3 Adults

will support 1 retiree

Steps in the Predevelopment of a Retirement Community

Determine • Demographic analysis of the market • Site selection process (boots on the ground) Assess • Community with respect to neighbors, neighborhoods, government and

competition • Local market specific demographics • Market rates based on how and where seniors are living Analyze • Market data, objective and subjective assessments • Development process complexity • Timing and costs Prepare • Financial proforma to asses financial feasibility

Assessing Financial Feasibility Review & Understand • The market • Location and land cost • Project positioning • What the unit mix will need to be • Time line for, and estimate of, occupancy build up • How projected unit pricing relates to the market • SWOT results for adjusting numbers • Available funding sources by type and appetite Sensitivity Analysis • Review differing scenarios in a proforma financial model • Adjust variables

Operational Steps Before Opening a Retirement Community

• Initial proforma review and approval (based on current market rates/ wages/ benefits/ op expenses)

• Marketing office • Coordinate contracts for phone, perimeter security, e-call systems • Utility connection documentation, approvals, and fees • Coordinate with contractor for water/sewer and electric to

marketing office • Review all design plans, FF&E and location of models • Review competitor analysis • Identify key referral sources and community leaders • Marketing and media plan outlines • Licensing process

Scheduling

• 12 months - begin recruitment of executive director

• 6 months - hire and train executive director

• 6 months - recruit, hire and train marketing director

• 2 months - recruit hire and train concierge

• 3 months - job fair and recruiting for department heads

• Begin networking for project

• Recruit additional marketing support

• Finalize marketing and pre-opening budgets

• Review resident agreement

• Modify policies and procedures manuals to conform to local regulations

Pre Opening

• Complete final year one operating budget

• Contract local support services

• Certificate of Occupancy for models

• Job Fair- recruit and hire all positions (care managers, housekeepers, cooks, etc.)

• Confirm accounts with food service vendors

• Complete model apartments

Pre Opening

Operational Steps to Open a Retirement Community

• Executive Director building walkthroughs • Employee files completed • Dietary housekeeping supplies and wares • Licenses and inspections • Complete resident agreements • Certificate of Occupancy – Building Inspector, Fire

Marshall, Contractor • Coordinate staff move-in to the property • Finalize first month’s resident move-in schedule • Regional training team on site to assist with staff

orientation and training

• Complete initial staff training and orientation

• Coordinate moving computers, furniture

• Complete Punch List

• Interior Designer complete FF&E installation

• Provide staff with equipment operations manuals

• Final cleaning of building

• Pre-opening reception for prospective residents, families, dignitaries

• Home Opening and Resident Move-In

• VIP Party

• Press Tour

Sources

• Independent Living and CCRCs by Jim Moore www.m-d-s.com

• Shock of Gray by Ted C. Fishman Scribner, New York • Age Wave: How The Most Important Trend of Our Time Can

Change Your Future by Ken Dychtwald http://www.agewave.com/

• Forbes Magazine, October 2012, Lee Kuan Yu;“Warning Bell” • The Elderly in Singapore; Wong Yuet Mei and Teo Zhiwei;

Singapore Department of Statistics • MetLife Mature Market Institute Study 2012

Web Sources

• www.aegisliving.com/aegis-living-of-aegis-gardens/ • www.theclareatwatertower.com/ • www.m-d-s.com Jim Moore • https://en.wikipedia.org/wiki/One-child_policy www.metlife.com/mmi/index.html • www.icaa.cc Colin Milner: International Council on Active Aging • http://www.econhealthcare.com/ • http://www.aegistherapies.com/home.aspx?showpage=true • http://perkinseastman.com Brad Perkins

Thank You

David P Collins

Managing Partner

Active Living international

www.activelivinginternational.com