Archive for the ‘education’ Category

I have written twice before on this blog about the opportunity to convert small college campuses in senior housing communities. The first time was February 2, 2019 in response to an opinion piece in the Wall Street Journal about the challenges facing small, private colleges and how many of these would need to close or radically change their operations to survive. I reissued my original post with some updated commentary in September 2019 after Welltower REIT announced it acquisition of a college campus in the Boston area for conversion to a seniors housing community.

Today’s Wall Street Journal has an article entitled “Coronavirus Pushes Colleges to the Breaking Point, Forcing ‘Hard Choices’ about Education. The Journal article leads with the announced closing of MacMurray College in central Illinois after 174 years. The article goes on to indicate 50% of college enrollment managers are very worried about meeting fall targets for enrollment and tuition.

Before the pandemic, Robert Zemsky, a professor at the University of Pennsylvania graduate school of education in his book The College Stress Test indicated that 100 of the nation’s 1,000 private, liberal arts colleges were likely to close over the next five years. He now says 200 of these colleges could close in the next year, according to the Journal. Potential cancellation of on-campus classes this fall, growing impediments to overseas students and the increased appeal of lower cost, closer to home college alternatives all contribute to the growing financial distress of American colleges.

While the seniors housing and care is facing some challenges of its own, including: lower occupancy, some overbuilding, restricted admissions to due Coronavirus self-isolation and high levels of infection and death at some skilled nursing facilities, the number of seniors 75+, when many begin considering seniors housing and care options, is expect to grow about 40% between 2020 and 2030.

Strong population growth in the 75+ senior population, together with the fact that many seniors are looking for more dynamic living environments that include life-long learning, make us optimistic about redeveloping exiting college campuses in whole or in part to seniors housing.

Earlier in my career, before I began to focus on seniors housing and care and health care real estate as a stock analyst and investment banker, I spent more than five years as a real estate market and feasibility consultant doing a lot of work for colleges and universities including: University of Maryland at its flagship College Park campus, its Baltimore professional schools and UMBC in Baltimore County, Johns Hopkins, and Penn State Hershey Medical Center.

Please contact me at jdoc@robustretirement.com if you wish to discuss specific college to senior housing projects.

Posted in colleges, education, Finance, Senior Housing & Care, Senior Housing Innovation | No Comments »

On September 18, 2019, news sources reported the sale of the Newbury College Campus in Brookline, Massachusetts to the health care REIT Welltower for redevelopment into a senior housing community. Welltower reportedly acquired the nearly eight acre site containing 8 buildings with approximately 142,000 sq. ft. for $34 million. Welltower’s purchase confirm my view, expressed in a February post, that small college campus have the potential to be successfully converted to seniors housing (see below).

There was an opinion piece in The Wall Street Journal on Friday, February 22 entitled “America’s Disappearing Private Colleges”, written by Allen C. Guelzo, a professor of history at Gettysburg College. The piece documents the closing of Concordia College, a small historically black school in Selma, Alabama. It goes on to assert “The post-Great Recession baby bust will soon mean not enough students to keep small schools alive.”

In the early 1990s I spent more than five years advising colleges and universities on real estate issues. My clients included the University of Maryland, Johns Hopkins and the Hershey Medical Center of Penn State. Even then, future weakness was evident in demand for higher education once the Echo Boomers (children of the baby boomers) passed through their college years. As Mr. Guelzo documents, the decline in the number of future potential college students has worsened since that time because of the Great Recession.

“Birthrates plunged by almost 13% from 2007 to 2012 and the CDC believes fertility could fall further”. The birth dearth means 450,000 fewer college applicants in the 2020s according to economist Nathan Grawe in Demographics and the Demand for Higher Education.  Hardest hit will be New York, Pennsylvania, New England and around the Great Lakes, areas most populated by private colleges.

Harvard and other well regarded and well-endowed universities will continue to see high demand and have the resources to make their institutions more affordable and more attractive to U.S and international student. Rice University, my son’s alma mater, for example just announced a 30% increase in applications after the University put in place a more generous and more predictable aid formula and my alma mater, Johns Hopkins University, recently announced a major gift from alum Michael Bloomberg to provide more generous aid for undergraduates.

While the best regarded and best-endowed colleges and universities will continue to do well, Mr. Guelzo documents a number of small colleges closing, “17 in Massachusetts alone in the past six years”, and cites estimates that up to half of all U.S. colleges will close or go bankrupt within the next decade. Moody’s estimates that 15 private colleges will close per year. My experience as a real estate advisor to colleges and universities, and as a student of demographics, lead me to believe these dire predictions.

At the end of his opinion piece, Mr Guelzo identifies four options for leadership of small private colleges (1. Get serious about mergers, 2. Focus recruitment strategies westward where the decline in birthrates was lower, 3. Craft a niche for a particular student, and 4. Establish partnerships with local two-year colleges. ) I doubt any of these options alone will be very effective in combatting the “birth dearth” but see another option that small colleges should definitely consider – converting in whole or in part to seniors housing communities.

I make the connections between private colleges and seniors housing because, after working as a real estate advisor to colleges and universities, I spent 15 as a stock analyst covering senior’s housing and care companies and REITs owning seniors housing and heath care real estate. While the demographics driving potential demand for colleges and universities are dreadful in the 2020s, the demographics driving demand for seniors housing and care are very strong. The first Baby Boomers turn 75 in 2021 and turn 80 in 2026.

Senior housing operators and REITs owning senior housing real estate are currently struggling with some overcapacity pressuring rents and occupancy and higher labor cost pressuring margins. I believe the seniors housing industry was too optimistic about the age at which seniors would move to seniors housing, found capital too easy to get, which prompted some overbuilding, and has been less than fully successful in providing living environments to which seniors want to move. Lower levels of seniors housing construction and the continued aging of the population should gradual and significantly improve demand prospects for seniors housing in the 2020s. I believe converting small colleges in whole or in part to seniors housing has the potential to allow small colleges to survive or provide a softer landing for faculty and staff at colleges that need to close; and can also provide a more desirable housing option for seniors and potentially help with labor costs.

Some of the most successful and most attractive senior housing communities i have observed offer campus-like settings with a wide range of social, cultural, educational and recreational amenities. Erickson Living and Senior Living Communities and a number of large not-for-profit continuing care communities (CCRCs) provide attractive campuses with a high level or amenities. (See links below to ericksonliving.com and senior-living-communities.com). Erickson’s first senior housing community was developed on the site of a former convent with some of the same qualities as a small college campus.

https://www.ericksonliving.com

https://senior-living-communities.com/

The challenge of developing large CCRCs is that they require very large upfront investments of money and time to be created on a greenfield basis. Small colleges, which have campuses, dormitories, cultural, educational and recreational amenities in place, could potentially be converted to seniors housing campuses at a lower cost than greenfield development while offering name recognition and character from the outset. One other feature seldom seen in senior housing communities, but which appears to significantly increase a community’s appeal to seniors, is a mixed age environment rather than a senior citizen ghetto. My favorite example remains Merrill Gardens at the University (see link below).

https://www.merrillgardens.com/senior-living/wa/

Merrill Garden at the University is a community near the University of Washington in Seattle that combines a senior housing community, non-age-restricted apartments and retail on a single site with the apartment building and senior housing community sharing an interior courtyard and the senior housing community’s bars and restaurant open to the public allowing apartment and senior housing residents to mix. Senior housing communities developed on or near other university campuses also have been attractive to seniors and appeal to alumni but I believe there is an opportunity to more fully integrate seniors housing into a college or university campus and create more interaction between seniors, traditional college-age students, faculty and staff than has been done to date. It is this type of integrated seniors housing / college setting development that I see as an attractive 5th option to those Mr. Guezlo identifies to save some of America’s small colleges.

Integrating senior housing into an existing college campus or fully converting a small college campus to seniors housing may also offer labor force benefits because students, existing college staff and potentially even faculty could be employed to providing programming, patient care and building maintenance for seniors housing as well as university buildings and might form a base labor force from which senior housing could draw even if the college is closing. Seniors may also be able to help fill college classes, particularly in the humanities or even serve as adjunct faculty.

The most feasible strategy for a college to evaluate and execute a partial or full conversion to seniors housing is to engaged qualified real estate and financial advisors to evaluate the option and help run a process to select a for-profit or not-for-profit senior housing partner. For some religious-affiliated colleges, the same denomination may also develop and operate seniors housing, which might ease some of the anxiety of teaming with a senior housing partner.

I welcome inquiries from colleges and universities wishing to consider a college to senior housing conversion and may be able to help evaluate such options at a strategic level and assemble a team to help a college or university execute such a conversion. For some insights into the process see the link to an article I co-authored in 1996 entitled “Privatizing University Properties” in the Journal Planning for Higher Education.

https://www.scup.org/page/phe/read/article?data_id=31113&view=article

Tags: , , , , ,
Posted in colleges, education, Finance, Lifestyle Choices, Senior Housing & Care, Senior Housing Innovation, universities | No Comments »