When Don Allgeier required hip replacement surgery last year, he and his wife Betty decided to sell the house where they had lived for 24 years and look for a retirement home.
They checked out several options before choosing Westmount Retirement Residence, a new 105-suite facility here overlooking natural wetlands and a big school yard.
Owned and operated by Chartwell Retirement Residences, Westmount is typical of a new generation of retirement homes providing a range of services for today’s “private pay” retirees – those with comfortable personal income – and gearing up to offer even more choice for tomorrow’s even more affluent baby boomers.
“Your grandmother’s retirement home is not the retirement home of the future,” says Alex Avery, a real estate analyst with CIBC World Markets, who sees the seniors housing market as at an “in between” stage of development.
“The traditional retirement home of 15 to 20 years ago isn’t the retirement home of today, but the retirement home of the future is probably going to look a lot different than what you see today as well,” he predicts. “We are in the midst of a transformation of the seniors housing industry.”
Demographics are driving the change.
By 2025, Statistics Canada expects that Canadians over the age of 75 will account for 9.1 per cent of the population, up from 6.7 per cent currently.
In April, RBC Dominion Securities Inc. forecast “potential nationwide demand for an additional 4,000 to 5,000 private-pay suites annually for the next 15 years.” RBC analysts singled out boomers as “likely to be demanding in terms of their desire for hotel or resort-like settings and higher levels of service.”
Growing demand from a seniors cohort that is healthier and wealthier than past generations is “very appealing over the next 20-25 years,” says Vlad Volodarski, chief financial officer at Chartwell, a real estate investment trust based in Mississauga, Ont., and the largest provider of seniors housing in Canada.
Since 2003, through acquisitions and new construction, Chartwell has expanded five-fold to more than 200 facilities with more than 25,000 suites in Canada and more than 6,000 in the United States. About 85 per cent of suites are private pay, with the balance in long-term care facilities.
“The immediate growth in the next five years is not as stellar as it is going to be, but then it doubles in the five years after and then doubles again the five years after that because of the aging of the population,” Mr. Volodarski says.
Operators are gearing up for the greying tsunami, analysts say.
“If you are spending $30-$40-million on a project, you are developing it for the longer term,” says Colin Johnston, president of the research, valuation and advisory group for Altus Group Ltd., a global real estate consulting firm with a seniors housing practice group. “So you are attracting the seniors of today but you are also trying to win over the influencers – the children of seniors.”
With aging children mulling their options, adds Mr. Johnston, “that’s why you are seeing the value of the high-end finishes, the granite and the hardwood, spas, bowling alleys.” The food experience has become “paramount,” he says, with chef-prepared meals and private dining rooms for entertaining family and guests.
He notes how demand for choice is reshaping the landscape. “It is conceivable that new product offerings may evolve in the coming years that find ways to attract the more independent and healthy senior,” he observes. For example, operators are looking at more private-pay alternatives for the Alzheimer’s/dementia segment of the market traditionally served by long-term care facilities.
At Westmount, the Allgeiers selected a 662-square-foot one bedroom and a den with high ceilings, a walk-in shower, a medical assistance call bell, access to a nurse on site, and a kitchenette for breakfast and snacks. The price tag is typically about $5,000 a month, including two meals a day. Residents pay extra for other services and amenities, such as pill dispensing, bathing three times a week, laundry and parking.
“We knew it wasn’t cheap coming in,” says Mr. Allgeier, 84, a former company treasurer. He and his wife have no children and both retired with pensions and other assets. “But we think we have planned properly and we will be okay. … So why not live to the best of our ability, which we enjoy?”
Mrs. Allgeier, 82, who still drives, was pleasantly surprised by the freedom and privacy. “No one comes in unless we say you can,” she says.
Creating a home-like atmosphere is essential, says Laura Stokes-Crain, director of sales and marketing for Waterloo, Ont.-based Shlegel Villages, with retirement home and long-term care facilities in Southwestern Ontario. “Let’s not look at these as institutions but as where people live and spend their days,” she says. “How do we nurture them in that environment?”
One answer, she says, is to offer more options for retirees to “age in place” without having to relocate to a long-term care facility. “We are trying to figure out a way where you are living in the apartment but you can have a different level of care,” she says. Schlegel offers health-care packages that range between $400 and $2,400 a month, depending on the level of need.
Despite attractive demographics, seniors housing “is not for the faint of heart,” warns James McKellar, director of the real estate and infrastructure program at York University’s Schulich School of Business, citing increased regulation, labour costs and the mental “hurdle” for affluent seniors to choose retirement-home living.
As well, a retirement-home construction boom midway through the past decade pushed up vacancy rates, says Mr. Avery, of CIBC, forcing operators to offer temporary discounts. But he says industry vacancy rates are tightening again.
For their part, the Allgeiers have no regrets about their decision. But on one issue there is no substitute for home. “I do miss Betty’s cooking,” says Mr. Allgeier, smiling.
The seniors housing sector attracts a mix of players. Some are real estate investment trusts that focus on generating cash distributions to investors from owning and managing a complete range of seniors housing facilities. Others are pension funds attracted to asset-backed investments with a stable cash flow. A few are private equity firms.
Last year, Chartwell Retirement Residences, Canada’s largest seniors housing provider, and Ohio-based Health Care REIT Inc. purchased 39 properties in Canada for $850-million, with Chartwell managing an additional three retirement homes acquired by Health Care for $81-million. The properties are located in Chartwell’s target markets of Quebec, Ontario, British Columbia and Alberta.
In 2012, through an independent public offering, Regal Lifestyle Communities of Toronto became Canada’s newest publicly listed owner and manager of current generation, private-pay retirement communities, according to a report by RBC Capital Markets.
Earlier this year, Health Care REIT Inc. and Mississauga, Ont.-based Revera Inc. agreed to a 75-25 per cent share of 47 Revera properties in Canada, a portfolio valued at $1.3-billion. Revera is a subsidiary of the Public Sector Pension Investment Board, which invests the plans of the federal public service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force.
Vlad Volodarski, chief financial officer for Chartwell Retirement Residences, sees “potential for more deals with the U.S.-based and international players.”
“The thing that is very different from everyone else [in the housing market] is the future demographic trends that our sector will experience and the whole story of baby boomers coming into retirement age when they would start entering into seniors housing accommodation,” he says.