In June, Capri Communities LLC filed plans with the Village of Menomonee Falls to build a 226-unit senior living facility adjacent to Grace Lutheran Church & School where residents will be offered options ranging from independent living to memory care.
The development is in addition to the 321 units Brookfield-based Capri announced it would be adding in Germantown, Port Washington and the East Side of Milwaukee since January, and the 90-unit Brookfield building the company acquired for $11.2 million in May.
All told, Capri Communities, which was founded by James Tarantino in 1992 and operates as Capri Senior Communities, has added 637 senior living units to its portfolio this year.
But the company is not alone. Senior living operators across southeastern Wisconsin and the country are ramping up their expansion efforts as the oldest baby boomers are just beginning to need the services their companies can provide.
“Over the last three years, our organization has changed a lot,” Tarantino said. “The silver tsunami has reached us.”
And many of the facilities elderly people are moving into today have far more amenities than the nursing home your grandparents lived in.
“When we started, people thought of our buildings as a nursing home,” Tarantino said. “Now, as people in their 70s look at how they want to spend the rest of their lives, they want more.”
The idea of giving seniors more than a bed and three square meals a day has resonated with Tarantino and other operators. Today’s senior living complexes are a hybrid of luxury apartment, four-star hotel and health care facility.
West Allis-based Heritage Senior Living LLC, which has 14 locations throughout Wisconsin, offers multi-sensory Snoezelen rooms, which utilize light, sound and touch to stimulate the brain.
“The silver tsunami has reached us.”
Amenities offered in new developments include wine rooms, heated therapy pools, salons and spas, bocce ball courts, putting greens and common areas where residents can host holiday parties and book clubs.
When Eden Prairie, Minnesota-based New Perspective Senior Living opened its $30 million, 135-bed senior living facility in August 2016 in Brown Deer, it included a pool table, a library, a Starbucks and a pub, where residents are served two free drinks a day.
The company also has local facilities in Brookfield, Mequon and West Bend.
Building boom
Since the end of 2015, Milwaukee, Ozaukee, Waukesha and Washington counties have seen 900 new senior living units enter the market, which is a 6 percent increase over the past 18 months, said Beth Mace, chief economist and director of outreach at the Annapolis, Maryland-based National Investment Center for Seniors Housing & Care.
Milwaukee is on par with the national rate of growth for new senior housing units, which is also about 6 percent for the same time frame, Mace said.
Mace anticipates the number of units coming online over the next few years will continue to grow as the baby boomers age.
“Today, most residents were born in the mid-1930s; the baby boomers were born between 1946 and 1964, so we are not even there yet,” Mace said. “Supply is a good thing. It brings new products to the market that can make seniors more physically active and social.”
Area contractors have noticed the uptick, as well, with some builders saying senior living facilities and new industrial building projects will continue to sustain the construction boom in the area once larger projects such as the Milwaukee Bucks arena are complete.
“(Senior living) is having an impact on our industry – and a positive one, I may add,” said Dan Bukiewicz, president of the Milwaukee Building & Construction Trades Council. “It is hard not to notice the number of senior housing types of buildings that are going up in the area. These facilities have more complex needs, systems and codes than a typical housing project. The union building trades are best suited to meet all of the requirements for these types of facilities. They are also helping provide the opportunities that are needed for many to start a family-supporting career in the trades.”
Since the wave of expansion began at the end of 2015, the occupancy rate at Milwaukee-area senior living facilities has dropped slightly, from 92.4 percent to 90 percent.
Occupancy rate is not a concern until it is in the mid-80s, Mace said. The Milwaukee area hit an all-time low in mid-2013, at 87.7 percent, she said.
The largest senior living provider in the state, Heritage Senior Living, opened a 124-unit location in Delafield at the end of March and broke ground on a 136-unit property in Kimberly in July. Next year, the company will open a senior living facility in Muskego with 100 units, giving Heritage a total of 360 new units in two years.
Milo Pinkerton, founder of the company, said the decision to expand was based on market studies.
“This is a business operation that is open 24-7 and takes many, many years of refinement to make successful.”
“We have some other areas we have studied, but have not purchased the land yet,” said Pinkerton, an architect by training who also owns MSP Real Estate Inc. and MSP Development Co. Inc.
“That will be a 20-year run of higher demand that has not even taken off yet,” Pinkerton said, adding that he anticipates the baby boomers will begin needing assistance in 2022. “I don’t think we’ve overbuilt the market. Twenty years from now, maybe we’ll be overbuilt like the apartment market is today. I’m hoping they will have a cure for Alzheimer’s – but I’ve already designed for that.”
In addition to the large operators like Capri and Heritage opening new locations, senior living facilities offering the full spectrum of independent care to memory care are planned or have already opened in Franklin, Sussex, Brookfield and Glendale.
Even Drexel Town Square, the mixed-use development in Oak Creek that boasts restaurants, retail and high-end apartments, has carved out a space for seniors. Minnetonka, Minnesota-based senior living apartment developer The Waters Senior Living Management LLC purchased 2.5 acres in the development to build a senior living facility with up to 140 apartments.
The first phase of the St. Camillus expansion project in Wauwatosa is expected to be completed in November. It includes a 72-unit assisted living building specializing in dementia care and a 50-unit Jesuit community house for the Order of St. Camillus. Phase two includes a proposed new east tower independent living building that is currently working its way through the city’s approval process.
Saint John’s on the Lake on Milwaukee’s East Side is planning a third, 22-story tower on the corner of North Prospect Avenue and East Kane Place that will serve the 74 residents living in the skilled nursing assisted living portion of the community. Renee Anderson, president and chief executive officer of Saint John’s, who has worked at the company for 21 years, said how Saint John’s works with residents has changed over the past two decades.
“We have intentionally shifted from a culture of serving our residents to partnering with them to ensure that the services and care we provide are meeting their needs and desires,” Anderson said. “We have residents on our board of directors and serving on committees to actively do work on behalf of the organization. I can’t imagine how they want to live. They know how they want to live.”
Anderson said that shift happened around 2000 and has continued to progress.
As far as needing more space, Anderson said since Saint John’s opened its residence tower in 2011, the waiting list has increased. After the construction of the third tower, Saint John’s, which is landlocked, will not be able to expand in that location again, she said.
Increased competition
Even non-senior living operators are dipping a toe into the business.
High-end Milwaukee multi-family housing developer Mandel Group Inc. is incorporating senior living into some of its newer projects.
Mandel’s Dunwood Commons project in Fox Point includes an 80-bed memory care facility at the former Dunwood Elementary School site. The memory care facility will be run by a senior living operator.
Mandel also in November announced a $75 million proposal in River Hills that includes a 400-unit housing development at the 53-acre Eder farm property along Brown Deer Road. The proposal included two senior living facilities totaling up to 175 beds.
“We aren’t actively developing senior-only facilities right now, but are working with a lot of (senior living facility) developers who have been at this kind of work for a long time,” said Robert Monnat, a partner at Mandel Group. “Given the demographics, we’re committed to meeting the need for the wide variety of senior living settings, the demand for which is growing weekly. Currently, we’re satisfied with partnering with qualified parties; however, in the future we haven’t ruled out actively developing them ourselves.”
Pinkerton said he always welcomes more competition and believes choice is good for everyone. But he cautioned the business is not for the faint of heart.
“It takes a lot of capital to start from scratch, to go through construction and to fund the shortfall during lease up,” Pinkerton said, estimating it costs $150,000 to $200,000 per unit to start a new facility. “This is a business operation that is open 24-7 and takes many, many years of refinement to make successful. Frankly, I would not recommend it to a lot of people.”
In addition to the new construction, there have also been many recent acquisitions of senior living facilities, which will likely continue, Mace said.
Institutional investors began showing interest in senior living facilities after California’s state public pension system, CalPERS, became a large investor, Mace said.
Today, three of the country’s largest health care real estate investment trusts, Toledo, Ohio-based Welltower Inc., Irvine, California-based HCP Inc. and Chicago-based Ventas Inc., are actively investing in senior living facilities, which is why there has been so much acquisition activity, Mace said.
Typically in these acquisitions, the property sells for an average price of $175,000 per unit, Mace said.
Locally, Welltower sold the Harbour Village senior living community in Greendale to a New York-based firm for $51 million in March. Welltower has five properties in the Milwaukee area.
The average price to live in a senior living community in the Milwaukee area is $3,063 per month. The national average is $3,800, according to Mace. The price covers housing, food, utilities, taxes, laundry and some level of care. Memory care units cost more.
Units are private pay. When the individual’s money is depleted, Medicaid, the government health insurance program for the poor, does not typically cover the costs other than for some select services, and reimbursements vary.
If a resident can no longer afford the facility, he or she has to move to a lower cost option.
Tarantino, who has family members at many of the Capri facilities, said he has developed a number of affordable housing developments, but admits it is a challenging dynamic of the business, especially as the life expectancy rate gets longer and the cost of care at the end of a person’s life is higher.
Workforce shortage
Another challenge for operators is finding enough people to care for residents.
Heritage has 610 employees in Wisconsin and 370 in the greater Milwaukee area. Seven years ago, Capri had 50 employees. Today, it has 550 to 600.
The business has changed. It is more professional and the competition has also increased.
“Innovation is not going to replace staff, so we really try to focus on finding the right people and then figuring out how to retain them,” said Pierre Verger, vice president of operations for Heritage Senior Living. “Taking care of seniors every day, for 40 hours a week, is not an easy job.”
While speaking at a University of Wisconsin-Madison alumni event several years ago, Pinkerton met Verger. Verger had a health care background in France, which impressed Pinkerton, and the two became friends. About two years ago, Verger moved to the United States to work for Heritage and began using some of the employee retention tools he used in France.
That includes daily flash trainings when caregivers come into the building.
“Every day, for 10 to 15 minutes, it is a way to connect with staff and have contact with them,” Verger said. “Competitors have been very creative in what they can offer. We don’t want this to be a two-year job, but a life.”
At Capri, Tarantino has started a youth apprenticeship program. Capri is working with several school districts, including Cedarburg, Grafton, Port Washington, Menomonee Falls and Random Lake, to introduce young people to several of the positions the company has to offer.
“We’re not only in health care, we are in dining and food service, management, maintenance, asset management and construction, so for a young person there are a lot of different career tracks to get acquainted with,” Tarantino said.
The company is also working with workforce development groups in Ozaukee and Waukesha counties to connect with people interested in getting a certified nursing assistant license.
“It is hard to find people that have a caring nature,” Tarantino said. “We want to attract people not only as a place to work, but as a life’s mission.”
Since the end of 2015, the Milwaukee area has seen 900 new senior living units enter the market.
Baby boomers will begin needing assistance in 2022.
The average price to reside in a senior living community in the Milwaukee area is $3,063 a month.
