Although Toledo, OH-based Welltower has “curated” its seniors housing portfolio to focus on properties in “high barrier-to-entry markets,” the real estate investment trust is aware that middle-income individuals will need more affordable options in the coming years, Chairman and CEO Tom DeRosa said Wednesday during a presentation at the REITweek Investor Conference in New York. The conference is convened by Nareit, a Washington, D.C.-based association for REITs and real estate companies.
Many senior living communities, DeRosa said, have become “private-pay skilled nursing facilities” as resident acuity levels increase, necessitating additional hiring and driving up costs, DeRosa said. People living in markets such as U.S. coastal cities and Montreal, Toronto and London, where Welltower has chosen to focus, he added, “have the wealth to pay but our data tells us [also] have the desire or propensity to pay for this service.”
Concentrating on those areas “is one of the reasons our performance is better” financially, he said.
“At the same time, we know that this product is necessary and it will become out of reach to the middle class. I will tell you that Welltower is very focused on how technology can be used to reduce the human labor component, which is so much a part of the high cost, so we can enable more people, when they need residential care because of the state of their physical frailty or their mental impairment,” DeRosa said. “We have to figure out how to drive more affordable products. And all I can tell you is, stay tuned. We are very focused on that. A lot of this will come out of the collaborations we have with health systems and payers.”
Senior living overall continues to garner interest from investors and healthcare systems because of the move from fee-for-service to value-based care delivery, DeRosa said. “You are starting to see investments made around driving more integration, because ultimately we want to manage the population at a lower cost and improve outcomes,” he said.
Welltower’s joint venture with the ProMedica Health System to buy HCR ManorCare is a good example of a system that is vertically integrated, he said.
“Many people say, ‘Oh, you bought a bunch of SNFs,’ ” he said. “What we bought was a business platform that had post-acute care, assisted living with a focus in memory care, and home care and hospice. This has enabled a health system to start to better manage the population in the markets in which it serves. This is also a health system that has a payer.”