Ziegler Senior Living Finance

Reinventing The CCRC

ZIEGLER CAPITAL
th Annual MARKETS Date
11 National Senior Living CFO Workshop April 29 – May 1, 2009

SHARON BROOKS
President & CEO, SB&A Integrated Marketing
Partner, Brooks Adams Research
Sharon.Brooks@SBandA.com

Part of the Ziegler CFO Workshop SeriesSM

 Objectives

Alternative Session Title: The Frugal CFO’s Guide to

Increasing Occupancy and Revenue!

• How can CCRCs deal with poor occupancy and/or dated

facilities, and re-tool their services/products WITHOUT
engaging in expensive repositioning projects?

• This session will provide attendees with revenue

enhancement alternatives.

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 Define Expensive

• What’s the cost of empty residences?

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 Define Expensive

• What’s the cost of continued falling census?

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 Two current real life examples:

• 90% Occupancy
– Unrealized Entry Fee Revenue = $9,680,000*
– Unrealized Monthly Fee Revenue = $662,496*
– Marketing Budget: $435,000

• 74% Occupancy
– Unrealized Entry Fee Revenue = $18,022,000*
– Unrealized Monthly Fee Revenue = $2,246,400*
– Marketing Budget: $365,000

* These amounts don’t include anticipated attrition

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 Don’t tell anyone, but….

• The marketing task is never completely accomplished in

our field

• Jim Collins’ flywheel and doom loop are real and they
can both be found in marketing

• Yesterday’s “no big deal” is today’s “the sky is falling”

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 Typical Scenario

• Years of strong marketing performance without high

investment in capital improvement or marketing

• Slow decline and denial

• Rapid increase of competition from 2000 to 2005

• Rapid proliferation of “other” options

• Dramatic impact of the last two years’ real

estate and stock market busts

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 Typical Scenario
• Attrition has been higher than normal

• Wait list is soft

• Suddenly occupancy has fallen below 90%

• Amenities are not up to par

• Residential finishes are not up to par

• Marketing staff is not aggressively sales focused

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 Top ten signs your amenities aren’t up to par

• Mauve and teal

• Queen Anne furniture
• Plastic or silk floral stuff everywhere
• Signs
• “Cutesy” stuff
• The only pool you have is an
old billiards table
• There’s a fan bike in your fitness center
• Big brass chandeliers
• Heavy draperies
• Lots of wall paper borders

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 Top ten signs your residences aren’t up to par

• Oak cabinets
• Sheers or skinny mini blinds
• No washer and dryer
• A “kitchenette”
• Big speakers for the community PA
• Pull cords
• 7-foot ceilings
• Small windows
• Choppy floor plans
• Little wooden “check to see if I’m dead” knobs

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 What’s a CFO to do?

• Cash covenants vs. marketing covenants

• What if I spend money and nothing happens?

• Marketing has a two-mile long “list of demands” and

they’re holding our sales projections hostage

• How do we justify cutting back on staffing and services

and then spend money on “window dressing” and
expensive advertising?

• Oh, by the way, marketing is demanding more of

their fellow staff members, and people are
stressed out and fed up.

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 Priority # 1: Stop throwing good money after bad

• Stop implementing “knee-jerk” changes

• Don’t build “new old”

• Get some expert advice

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 Priority # 2: Audit/Research
• Find out what’s really driving your occupancy problems
– Changing demographics?
– Financial options?
– Health care options?
– Pricing?
– Program?
– Home sales challenges?
– Product issues?
– Poor marketing and sales?
• If you don’t know the REAL problem, you’re likely
to waste money on the wrong things
• Develop a short-term plan
• Develop a long-term plan

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 Priority # 3: Button up Marketing
• Make sure that when you do spend money, you won’t
sacrifice your hard-earned ROI with poor sales practices
• Identify your brand and market position
• Recognize that marketing is a system
• Spend more on marketing, but spend it wisely
• Don’t neglect Internet and direct e-mail marketing – it’s
a great value
• You’re faith-based, right? So have faith…. It can’t all
be tracked immediately or perfectly. Find someone you
believe in and partner with them. But watch closely,
and hold the team to task.

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 Key Marketing Issues

• Order takers won’t make it in this market

• Training
• Job description should be SALES not community relations
or management
• Can you afford a non-selling DOM or should you
outsource that function?
• Lead management
• Critical success factors
• Working hours and compensation structure
• Time management and accountability
• Other responsibilities

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 Priority # 4: Identify and implement all
of the free and cheap changes that you can make

• Clean up clutter – throw away, stow away

• Take down signs
• Landscaping
• Paint
• Fresh flowers and live plants
• Open up windows – replace heavy drapes with plantation
blinds or shutters
• Artwork on the walls
• More light
• New furniture in key spaces and in models

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 Free and Cheap Changes (cont’d)

• Smiles
• Energy
• Great programs
• Creative events that are FUN
• Resources for home sales support and moving
• Staged or full models
• A small incentive menu that lets buyers know you’re on
their side

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 Free and Cheap Changes*

• New financial options that will make a difference

– 100% refundable? Traditional?? Rental??? AOTA????
– Modified life care for those with LTCI?
– Free days or discounted health care?
• Service options
• Dining options that allow more freedom
– Monthly dining credit
– Any venue, any meal, guest meals, even catering

*Consult your actuarial and financial feasibility experts

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 Priority # 5: Address the two 800- Pound
Gorillas: The Housing Market and Portfolio Losses

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 What’s working?

• Understand and befriend the customer

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 What’s the consumer thinking?

• It’s too dangerous to do anything

• If I wait a year or two, my home value will return
• My portfolio is down – I shouldn’t liquidate anything
• Can I even afford to do this?
• What if my children lose their jobs?
• I can’t make any more money – I’m vulnerable
• What if this community goes bankrupt?
• I can’t afford for Mom to go to AL – I’ll
keep her here at home

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 What’s working?

• Educating the consumer

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 What’s working?

• Selling security

• Enhance health care benefits rather than cut prices

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 What’s working?

• Home sales support programs

– Brand your program
– Partner with respected realtor or relocation firm
– Full menu of services
– Potential to evolve into home- and community-based
services
– Introduce services EARLY

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 What’s working?

• Delayed entry fee payment

• Bridge loans

• Promissory notes

• Rent until sale

• Discount incentive for immediate entry fee

payment

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 What’s working?

• Guaranteed buy programs

• Equity lock

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 What’s working?

• Back to the basics

• The value proposition: Certainty in Uncertain Times

– Security
– Financial predictability
– Health care in place
– Control of future
– No burden to children
– Sense of community
– Freedom

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 What’s working?

• Working harder

• Critical success factors

• Follow up

• Relationship building and trust

• Referral source education

• Strong lead management

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 What’s working?

• Investing more

• Senior living must invest in marketing

• Study national benchmarks

• Compare cost of lost revenue

• Systems marketing!

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 Help your clients re-think things

• The real estate boom was irrational exuberance

• Not in synch with fundamental predictors of real estate

pricing: construction costs, rental rates, demand,
interest rates, employment

• Fueled by predatory/irresponsible lending

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 Help your clients re-think things

• Your home was still a great investment!

1985 Purchase Price $ 80,000

2005 “Paper Profits” $500,000
2009 Sale Price $400,000
Profit 400%
Annual Profit 11%
Annual Gain $ 21,300

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 Help your clients re-think things

• 2005 level pricing won’t return for a long time

• The market will stabilize and re-index to the

fundamentals

• Slow, steady growth from that point

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 Help your clients re-think things

• In a way, the CCRC decision is easier – you won’t be

leaving an investment that is rapidly appreciating – so
you’re free to make the right decision without feeling
that you’re sacrificing too much

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 Help your clients re-think things

Remember:
• Prices are local and regional
• Media doesn’t necessarily apply to your unique situation
• Homes ARE selling every day; 4.9 million homes sold in
2008
• You CAN sell your house if you approach it armed with
the facts

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 Help your clients re-think things

• The bottom line – life goes on through all sorts of

economic times. People are born, get married, buy and
sell homes, have children and retire on their own
schedule – not that of the economy

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 Help your clients re-think things

• The key is planning ahead, patience, good advisors, and

astute thinking. Don’t sit back and “see what happens”

• Make it happen the way you want it to.

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 Help your clients re-think things

• When you’re ready to enjoy the lifestyle, freedom and

peace of mind of a CCRC, good advisors and good
planning can ensure that your home won’t prevent you
from enjoying the best life has to offer.

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 Preparing for the Recovery

• Build your brand

• Educate your market

• Take time for strategic planning and research

• Take advantage of opportunities to renovate and re-

configure

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 Preparing for the Recovery

• Recognize that the world will never be the same

• Change will be more rapid

• Competition will be tougher

• Professional marketing and sales will be more important

than ever

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 Priority # 6: Residences

• Focus first on the place where people will spend most of

their time – in their home

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 Touch them where they LIVE

• Washers and dryers

• Walk in showers or spa tubs
• Color palettes
• Open up the floor plans
• Small jewels
– Closet systems
– Beautiful kitchens
– Flat screen TVs
– Built in storage

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 Priority # 7: Merchandize what you DO have

• What do you have that the consumer LOVES?

• Merchandize it well

• This requires creativity and an engaged staff – work with

HR and include training in your “investment” category

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 Transform

• An empty lounge into a coffee bar in the morning and a

wine bar at night
• An auditorium into a cultural arts center
• An empty room into a Brain Gym
• A rooftop into a garden
• An activities calendar into an events series or a 360
program
• A country store into a boutique

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 Transform
• A bathing room into a spa room
• A cavernous dining room into three dining options: buffet,
waiter served, exhibition kitchen or station dining
• Dark halls into bright halls – even if it’s only pale yellow or
vanilla white paint, surface mounted cove lighting and light
colored artwork
• A model apartment into a vision of the future
• A marketing office into an information center
• A wing of small apartments into a Catered Living
Neighborhood with higher service level and added fees
• Your expertise into a home- and community-based
services spin-off that generates revenue inside and out

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 Priority #8: Pick a few great investments

• Let your research be your guide

• Renovate the area or areas that are most important to

your prospects

• Include first impressions in this category

• Make sure that it’s part of a professionally led long-term

master plan

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 Giving Up is Not an Option
• I see too many people willing to settle for 85% occupancy

• Marketing is not a mystery or a voodoo exercise – it’s a

system; it WILL work

• You can’t afford to lie down and let the truck roll over
you

• It’s better to make more than to spend less

• Fight for your market share

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Ziegler Senior Living Finance

Questions & Answers

11th Annual National Senior Living CFO Workshop

B.C. Ziegler and Company is registered with the National Association of State Boards of Accountancy
(NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State
boards of accountancy have final authority on the acceptance of individual courses for CPE credit.
Complaints regarding registered sponsors may be addressed to the National Registry of CPE Sponsors, 150
Fourth Avenue North, Suite 700, Nashville, TN, 37219-2417. Web site: www.nasba.org. Attendees are
eligible to receive up to 12 credits for attendance at the 2009 Ziegler AAHSA National CFO Workshop. No
prerequisites are required for this group-live educational conference. Program level is basic.

For more information regarding administrative policies such as complaint and refund, please contact our
offices at 410-884-8300. Fees for this workshop are detailed on the registration form.

© 2009 B.C. Ziegler and Company Ι Member SIPC and FINRA