Entering the life care and retirement housing markets

Life care communities and other forms of retirement housing can be compatible ministries for health care sponsors. Successfully financing such projects, however, may be difficult if sponsors do not carefully evaluate the market. Determining the need for a proposed project should include the following steps: Study the elderly population trends in the defined market area, particularly data for the over-70 group. Identify the minimum income level for potential residents; a general guideline is one and one-half to two times the annualized rental fee. Determine the penetration rate to obtain the optimal demand for housing. Determine whether the project is viable by subtracting the number of existing and other planned units from the optimal demand for units; the remainder should be large enough to support the proposed project. Further evaluation of the market should include research to discover potential residents' perceptions about retirement communities and their preferences for services and type of units. Because of increasing interest in providing services for the elderly, numerous financing alternatives are available. Sponsors need not rely on internal financing or debt financing to maintain control. By carefully structuring a limited partnership and working with a private developer, for example, the sponsor can ensure involvement in the project without having to assume responsibility for debt or invest scarce capital.