According to a report in today’s (10/29/15) Wall Street Journal on page C1, the two-year budget agreement, passed by the House of Representatives on October 28th and headed to the Senate, will eliminate the ability of social security recipients to elect and suspend benefits at age 66 and have their spouse claim spousal benefits while the primary recipient with suspended benefits continues to increase their ultimate payment by delaying their own social security benefits until age 70. This strategy is described in books such as Get What’s Yours – The Secrets To Maxing Out Your Social Security and in my blog post on May 27, 2015 with the same title. The change is scheduled to go into effect six months after the budget bill becomes law, after which Social Security will not longer allow family members to submit a new claim for spousal benefits on a suspended benefit. So there may still be a small window for couples where both spouses will be 66 within the next six months to utilize this benefit.
Month: October 2015
Planning For Long-Lasting Retirement Income
After spending 15 years as a stock analyst evaluating healthcare REITs, senior housing and post-acute care companies, I decided to focus my blog on broader senior housing and care issues for individuals and companies, rather than recommending stocks or investment products. I intend to stick with this approach but want to make readers of my blog aware of a recently released white paper from Stifel Nicolaus’s Equity Compass Strategies funds management group. The white paper is entitled Rethinking Traditional Retirement Income and I found it to be a concise, well-written discussion of the tradeoffs between using the traditional 4% withdrawal rate for retirement planning and a 60%/40% equity to fixed income investment split for retirement savings. I have no financial relationship to the Equity Compass Strategies group at Stifel. You can access the white paper at
Observations from NIC 25th National Conference
The National Investment Center for Seniors Housing and Care (NIC) http://www.nic.org held its 25th National Conference this week at the Gaylord National Harbor, just south of Washington. I attended the first NIC Conference, which was a much smaller affair at a hotel in Crystal City, also just south of Washington but on the Virginia side of the Potomac. Having spent much of my career in seniors housing and care as a real estate analyst, stock analyst, investment banker and now occasional consultant, it was very gratifying to see how much the industry has grown and matured in 25 years.
My only official role at the conference was to address the Future Leader’s Council (FLC), which is a carefully selected group that goes through three years of NIC leadership development activities before “graduating”, with a third of the group rotating each year. I was impressed with the FLC members with whom I interacted and with the thoughtful way NIC is helping talented professionals grow into leadership roles at their organizations and in the industry.
My address to the FLC group was entitled “Back To The Future” and focused on lessons learned about the impacts of overbuilding and higher interest rates in the severe 1999/2000 industry downturn. Most FLC members were still in primary or secondary school when this downturned occurred.
I would say the overall atmosphere of the industry at NIC’s 25th National Conference was “nervous optimism”.
The nervousness comes from:
- generally unsettled economic conditions in the U.S. and around the world that could lead to higher interest rates and growing wage pressures on an industry for which labor is 50% or more of costs,
- recent softness in private-pay senior housing occupancy,
- a increase in the number of units being developed (particularly assisted living and memory care) and signs of overbuilding in select markets,
- integration stumbles at the largest and largest publicly traded senior housing operator, Brookdale Senior Living (BKD),
- some signs of a plateau in senior housing property capitalization rates and pricing,
- a late summer sell off in healthcare REITs and generally unsettled conditions in the equity and debt markets, which appear to be driving the pause or potentially a backup in cap rate compression.
The optimism comes from:
- a 15 year rebound in fundamentals from the last major industry downturn,
- generally outperforming other real estate sectors through the Great Recession,
- still strong consumer acceptance of newly open properties, particularly in high barrier to entry markets,
- plentiful availability and still growing interest in the industry from both debt and equity capital providers, if perhaps at higher prices that were seen a year ago,
- knowing that the industry continues to get closer to the holy grail of 75M + Baby Boomers becoming seniors housing and care customers (although still 10 – 15 years away).
Unless you are concerned about substantial overbuilding in private-pay seniors housing, which most thoughtful insiders are not (there will be some), the recent pullback in both healthcare REIT and operator pricing is making me more interested in investing in publicly traded healthcare REITs and private pay operators but there are few publicly traded operators to buy. On the care side of seniors housing and care, there has also been a pull back that makes skilled nursing and post acute care company stocks attractive from a valuation standpoint. Here, however, the slow evolution of a more integrated healthcare delivery system and new value-base purchasing and an uncertain political situation through the next Presidential election may keep a lid on valuations for another year or two. Either way, it feels like a time to be considering investments in seniors housing and care for the long term investor. I will leave it to those still working as equity analysts in the space to recommend specific stocks.
There are also signs at the conference that innovations in technology, property location and design are alive and well. At least two efforts are underway to develop new senior housing properties in Manhattan. The most interesting new building model I saw at the conference is a mid-rise product located in an urban main street location that looks more like an upscale yuppie rental project or W hotel, with services delivered on demand by the likes of Uber, Amazon Fresh and online home health providers. This project is being developed by Smart Living 360 and Federal Realty Trust (FRT) in Rockville, MD and is scheduled to open in the Spring of 2016. See website http://www.thestories.com/ for more information.