Aging

Aging//mike1st/dt2nd/mark2nd By SHELLY GARCIA Staff Reporter Behind the images of youth and glamour, Los Angeles is aging, and the telltale signs of its advancing years will soon be seen in a new group of businesses about to dot the San Fernando Valley landscape. Regional and national companies are coming to the Valley to develop housing for people who need help with daily chores like dressing or taking medication but who do not require the skilled nursing care usually provided in more traditional institutions for the aging. At least five companies have plans to build or renovate one or more of these so-called “assisted living facilities” in the Valley in the coming year, each with an average of 60 to 120 units. “What you’re seeing is a cottage industry that has grown into its own,” said Whitney Redding, a spokeswoman for the trade group Assisted Living Federation of America. “Assisted living has been extremely popular as a way of resolving some of the age-old inadequacies in long-term care.” The business is already huge, with annual revenues estimated at $12 billion to $15 billion and that’s projected to double by 2000, according to ALFA. Driving that growth is the population aged 85 and older, a demographic group expected to double to 7 million between 1994 and 2020, according to the U.S. Census Bureau. Not only are these people living longer, they are more affluent than the previous generation and therefore better able to afford the $40,000 or more annual cost of an assisted living residence (an expense not covered under private or public insurance programs). Indeed, the returns generated by assisted living facilities have not escaped the notice of real estate investors. “It’s a way to diversify real estate holdings instead of owning office or retail or apartments. Companies are looking at returns, and the returns have been pretty good,” said Wayne Sant, regional vice president for development at Marriott Senior Living Services, a division of Marriott International, which entered the assisted living industry in 1985. “This all started on a national basis when operators recognized the burgeoning senior population,” said Michael Bloxberg, a commercial real estate broker with Grubb & Ellis Co. “There’s a strong need for these facilities.” Part apartment, part hotel, these residences usually include studio or one-bedroom units with bath and kitchenette and common dining hall, and other gathering places like TV rooms. Most assisted living homes arrange daily activities that may range from bowling to movies or trips to the local shopping mall. Services, usually offered & #341; la carte, range from minimal assistance, such as help with paying bills and transportation to doctor appointments, to daily aid with dressing, grooming and overseeing medications. Unlike traditional nursing homes, which are largely funded by Medicaid, and in-home skilled nursing care, which may be covered by private insurance, residents in assisted living facilities generally pay their own way. The typical per-diem cost of an assisted living residence ranges from about $65 to $140, according to PricewaterhouseCoopers LLP, which compiles surveys on the industry for ALFA. It’s a cost the market seems increasingly willing to bear. The industry has been adding 10,000 beds each year for the past several years, according to the California Assisted Living Facilities Association. To tap the market, developers focus on communities with high concentrations of both elderly residents and baby boomer children, who typically want their parents within a 15-minute drive of their homes. That pretty much fits the Valley, which has a sizeable population of inhabitants who are now elderly as well as a second generation of baby boomer families. “The San Fernando Valley is very strong in terms of the overall population and their income,” said Todd Pratt, regional manager for land acquisition at Belmont Corp., a year-old subsidiary of Security Capital that has targeted Southern California as part of its national expansion. “There’s great likelihood that you’re going to have senior residents there who will be able to afford assisted living facilities.” In the Valley, people over 65 account for nearly 11 percent of the population, according to Health Demographics, a market research consulting firm. Using that figure as a base, Haddock & Associates, an assisted living consultancy in Portland, Ore., estimates there are 11,580 Valley residents over 75 who could wind up needing an assisted care facility. Based on those numbers, brokers and land-use consultants say they’ve been besieged by phone calls. “I’ve got a property on Ventura Boulevard that’s vacant, and I’ve gotten a ton of calls from a lot of different developers who want to use it for senior housing,” said Jeff Schermer, a broker with Carnahan & Associates. “Three years ago, we were the only ones bidding on sites,” said Marriott’s Sant. “But other states are getting overbuilt, so everybody’s focusing on California.” Marriott owned 30 senior facilities in 1996; today it has 105, and it’s developing about 10 more in Southern California, including one in Northridge. It takes about three acres of land to build an assisted living residence from scratch, developers say, and available parcels of that size are hard to find in the Valley. That makes competition fierce. Sunrise Assisted Living Inc., among the largest of these providers, employs three full-time staff members who do nothing but seek out potential development sites in California. “And we have been searching for properties just for development in Southern California for over a year,” said Tom Newell, president of Sunrise’s development subsidiary. The company has several L.A.-area sites either in escrow or about to go into escrow, but declined to provide details on those locations. “L.A. is certainly one of the major markets we plan to expand in,” Newell said. Paragon Homes, a regional developer in Santa Monica, is building an assisted living facility in West Hills, and plans to build two additional facilities in Granada Hills and Encino, said Bill Heistand, the company’s director of senior housing. “We target areas where you have a high ratio of seniors to adult children. They generally have to be in rather affluent areas.” While many companies are developing from scratch, others are acquiring pre-existing facilities. ARV Assisted Living Inc., for example, acquired a chain of 10 facilities throughout California this year, said Suzanne Shirley, a spokeswoman for the Costa Mesa-based company. Among them are locations in Encino, Camarillo and Thousand Oaks. Sunshine Assisted Living is buying 39 assisted living properties from Karrington Health Inc. Once that deal closes in December, Sunshine Assisted Living will own 110 such residences. Another large operator, Irvine-based MBK, has acquired an existing property in Van Nuys and is now renovating it for use as an assisted living facility, said Courtney Seeple, whose brokerage and development company represents MBK. “There’s a great demand in West L.A. too,” said Seeple, “but you can’t find the land there, and it’s too expensive.”