Senior Housing Care Plan Underwriting Key Empirical Assumptions

The senior housing industry business model’s psychological value proposition directly and/or indirectly addresses the need for assuaging the guilt associated with the intentional abdication of the care obligation people have to elder family members.  The implied bargain being the paying of money to a third-party to provide the love and support to a family member the responsible party will not or cannot provide.  They payment reflects a quality value business model requirement being observed at one point or another by almost all of the families involved and is therefore the business model of operations that has continual appeal over the long-term forecast horizon.

The fundamental impact of this important driver of consumer purchasing impulses requires every senior housing model of operations to address service quality on a proactive basis to sustain market penetration and continually safeguard deployed capital from loss severity risk exposure that advances in technology and service innovations would otherwise unavoidably create over the course of the typical 5-year investment holding period forecast assumption.

The INVIZEN model of underwriting requires a proactive approach to market disruption management and mitigation over the entire term of the investment holding period for the benefit of the securities holders. This management and mitigation program must meet the test that can be reasonably assessed by a reasonably-conservative third-party as being a sustainable business model of operations for each given class of commercial real estate income-producing property operating business, whether this empirical assumptions set proves to be the case in fact or not at any particular point in time over the course of the investment holding period.  Accordingly, the INVIZEN model of feasibility analysis and underwriting requires the staffing plan model of operations to provide proportional staffing resources to achieve the following minimum operating Key Performance Indicators as a condition precedent to a given operating period’s forecasted occupancy, whether the subject property’s Effective Gross Income supports said requirements or not (i.e.: if the resulting staffing load increases the requirement for the contribution of working capital to the business, this must be identified and accounted for in a given analysis):

  1. IADL Support KPI’s.  With the exception of age-restricted rental multifamily housing (i.e: senior apartment complexes that provide no bundled services) all senior housing properties are responsible for providing residents with services support for maintenance of Instrumental Activities of Daily Living (IADLs).
    1. Staffing Load Basis of Calculation.  The key drivers requiring operating expense calculation (and therefore revenue calculations as a result) include:
      1. Shopping – staffing resources have to be provided for scheduled transportation program support on a daily basis.  This requires 1 Full-Time Equivalent (FTE) employee be assessed to the labor pool at least 6 days per week, whether this is the case in fact or not.
      2. Maintenance – a full-time maintenance staff for maintaining resident units, equipment fixtures and furnishings on a routine basis.  This requires 1 FTE be assigned for each 100 apartment units, whether this is the case in fact or not.
      3. Housekeeping – a full-time housekeeping and laundry staff for maintaining resident apartments on a routine basis.  This requires the equivalent of 12 bay cleans be assessed per FTE for the property operations of occupied units, whether this is the case in fact or not.
      4. Food Service – a food service program be created for sustaining meal service every day for all three (3) meals on the basis of one (1) FTE being assigned for every 45 residents, whether this is the case in fact or not.
    2. Direct Staffing Plan Employee Class Delineation.  The following employee Standard Occupational Code (SOC) classes are potentially represented in the pool:
      1. 53-3053  Shuttle Drivers and Chauffeurs
      2. 49-9071  Maintenance and Repair Workers, General
      3. 51-1011  First-Line Supervisors of Production and Operating Workers
      4. 37-2012  Maids and Housekeeping Cleaners
      5. 35-2012  Cooks, Institution and Cafeteria
      6. 35-2021  Food Preparation Workers
      7. 35-3041  Food Servers, Nonrestaurant
      8. 35-9021  Dishwashers
      9. 35-1011  Chefs and Head Cooks
      10. 35-1012  First-Line Supervisors of Food Preparation and Serving Workers
    3. Compensation Requirements.  Compensation will be empirically-assumed to be 15% higher than the median hourly wage surveyed for the given geographical area in the latest available BLS data.
  2. ADL Support KPI’s.  Assisted living class facilities must provide IADL support activities services and Activities of Daily Living (ADL) support services that reflect the following KPIs:
    1. Staffing Load Basis of Calculation.  The key drivers requiring operating expense calculation (and therefore revenue calculations as a result) include:
      1. Bathing & Grooming Staffing Rate: the program must assume 15 minutes of staff time per day and per night for this function being supported for each resident, whether this is the case in fact or not.
      2. Eating Staffing Rate: the program must assume 5 minutes of staff time per meal for this function being supported for each resident, whether this is the case in fact or not.
      3. Transfer Assistance Staffing Rate: the program must assume 15 minutes of staff time per day and per night for this function being supported for each resident, whether this is the case in fact or not.
      4. Dressing Staffing Rate: the program must assume 10 minutes of staff time per day and per night for this function being supported for each resident, whether this is the case in fact or not.
      5. Personal Assistance Staffing Rate: the program must assume 15 minutes of staff time per day and per night for this function being supported for each resident, whether this is the case in fact or not.
    2. Direct Care Staffing Plan Employee Class Delineation.  The following SOC employee classes are potentially represented in the pool:
      1. 39-9099  Personal Care and Service Workers, All Other
      2. 31-1122  Personal Care Aides
      3. 31-9095  Pharmacy Aides
      4. 29-1141  Registered Nurses
    3. Compensation KPI’s.  As above.
  3. Healthcare KPI’s.  Dementia care facilities must also provide limited healthcare services to cognitively-impaired residents for the purposes of medication assistance and health checks that reflect the following KPIs:
    1. Staffing Load Basis of Calculation.  The key drivers requiring operating expense calculation (and therefore revenue calculations as a result) include:
      1. Providing medication reminders and assistance on each shift with an allocation of 15 minutes per resident per day for the completion of this tasking.
    2. Direct Care Staffing Plan Employee Class Delineation.  The following SOC employee classes are potentially represented in the pool:
      1. 31-9095  Pharmacy Aides
    3. Compensation KPIs.  As Above.
  4. Activities KPIs.  Senior housing properties provide organized activity programs to support the lifestyle and well-being of residents.  This requires the following KPIs be observed:
    1. Staffing Load Basis of Calculation.    The key drivers requiring operating expense calculation (and therefore revenue calculations as a result) include:
      1. Providing activity program management and assistance on each shift with an allocation of 10 minutes per resident per day for the completion of this tasking, whether this is the case in fact or not.
    2. Direct Care Staffing Plan Employee Class Delineation.  The following SOC employee classes are potentially represented in the pool:
      1. 21-1093  Social and Human Service Assistants
      2. 21-1021  Child, Family, and School Social Workers
    3. Compensation KPIs.  As Above.

The INVIZEN model utilizes these baseline empirical assumptions for creating the component operating department budgets of senior housing properties in the creation of pro forma financial feasibility analyses and underwriting review analyses (i.e.: capacity underwriting risk analyses) for securities private placement offerings.  For more information please contact INVIZEN at 832.663.8634.