There is optimism in the industry as capital begins to open up in the senior housing industry as we head into the new year. NIC MAP Vision CEO, Arick Morton, discusses the demands and current product availability for new development and acquisition. 

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This episode was recorded at the NIC Fall Conference.

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Produced by Solinity Marketing.

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Listen to more episodes here.

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Intro

Welcome to season seven of Bridge The Gap, a podcast dedicated to informing, educating, and influencing the future of housing and services for seniors. Powered by sponsors Accushield, Aline, NIC MAP Vision, Procare HR, Sage, Hamilton CapTel, Service Master, The Bridge Group Construction and Solinity. Produced by Solinity Marketing.

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00:31 - 00:46

Lucas McCurdy

Welcome to Bridge the Gap podcast the senior Living podcast with Josh and Lucas here in DC at the Fall NIC Conference with a great friend and a returning guest and a great partner to the program, Arick Morton. Welcome to the show. 

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00:46 - 00:48

Arick Morton

Thank you so much. It's a pleasure and honor to be here. And, excited to see how far you've come over all these years.

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00:48 - 01:23

Lucas McCurdy

Yes. Well, our audience is probably like, oh, yeah, we know Arick. We're looking forward to this data dump. Obviously, for those that don't know, Arick is NIC MAP Vision. It is the pinnacle, the nadir, of data in our industry. And we do this quarterly where you come on and bring the good information that people pay a lot of money for, and rightfully so, to give our audience and the industry great access to this information. So let's roll right into it. Give us the update for this quarter.

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01:24 - 02:45

Arick Morton

You know, we have data coming out here next week. And I mean, the story of the third quarter is really honestly kind of more of the same. So we're seeing, absorption kind of remain at those historically elevated levels pretty much in line with last year's performance depending on how you cut the market.

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But I think at a macro level, we're still seeing those absorption rates that are very historically elevated versus kind of anything we've ever seen pre-COVID. That's on the demand side. And, and, you know, there's kind of some interesting sub components to that. But I would say the, you know, the y intercept kind of where exactly the levels are for various primary markets, secondary markets, additional markets are email memory care.

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You know, there's some kind of variability there. But the slope of the line is pretty consistent. So we're seeing pretty uniform growth kind of across the board. On the supply side, historically low construction starts and supply growth continues. So we didn't see any kind of major pop, in, in new construction starts.

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We're still plumbing pretty much historical lows that we haven't seen since the great financial crisis. So I think if you kind of zoom out a little bit and look at that macro picture that we've been talking about. I think it continues apace. We're seeing the growth come and then we're not seeing the supply keep at pace.

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02:45 - 03:15

Josh Crisp

It's positive. So we're here at the Nik Conference in DC. Arick, I think everybody that we've been talking to and even I cannot it's kind of hard to put a pulse on it. It feels positive. Like way more positive than in previous years. And it's exciting. I feel like this boost of energy in our industry, although you're saying it's kind of just continuing steady, which is a good thing, but what do you think is attributing to this positive vibe?

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03:15 - 04:51

Arick Morton

Absolutely. Well, I heard that a lot of banks or kind of the regulator is allowing a lot of banks to, if there's a positive story about their senior housing assets, to continue to let those loans extend, and not really forcing people to refi in distress or to sell in distress.

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And I think that's because what we've seen is that the wall of maturities hasn't really caused a lot of kind of distressed sales and certainly not what people thought it would be in the year. And I think what that tells you is that the majority of the buildings in senior housing, even those that might have loans that are due or, or are kind of underwater, have a story that is positive enough that it makes sense to kind of ride the bus.

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And so I think that's kind of the core optimism is everybody's seeing improvement and it is substantial improvement. You know, it is in line with the historically elevated level. And then at the same time, you have kind of the capital market starting to soften a little that we just got 50 bets on the rate cut. Banks are starting to open up a little bit. And I think people are kind of seeing, you know, 2026, 2027 is really setting up. You have this incredible demographic growth. You know, that the legacy of the supply constraints are going to echo for years to come. And then if you have a more common accommodative interest rate policy, you know, that could set up for truly incredible conditions.

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So I mean, I think people are seeing that they're seeing their own allies up there, see margins up, you know, kind of across the board. and then they see an incredibly bright future that's, you know, not not decades away, but, you know, years away or months away.

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04:51 - 05:35

Josh Crisp

So that's probably a segue. And you kind of started to touch on it, I think. But forecasting over the next 12 months from the data trends, you're seeing kind of what we're all kind of hearing about what's happening. I feel like developers, owners, capital partners are probably more sophisticated than ever in their approach because of the data that you guys provide to them.

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I mean, it's more accessible than it's ever been. You know, I think about ten years ago, you would have had to have a whole data analytics team in-house to try to figure out in the guide what you guys put at our fingertips.

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How do you think that's changing, like what our industry is delivering to the consumer? I mean, from your perspective, I mean you get to see all these different developers. What's changing over the next 12 months based on data?

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05:35 - 07:40

Arick Morton

I think the big question when it comes to development specifically, I mean, I think right now what we're seeing is that acquisition prices are still at a place where, you know, if you're going to put a dollar of incremental capital to work, it's probably more there's probably a higher return to buying than there is building.

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Seeing a lot of activity around expansions. I think that's you know, I think in the short term that's where we're going to see a lot of the development come from is in people saying, hey, I got Flag Land and I see the, you know, we're at a 7 or 80 8 or 89 now, but I see that 90 to 95 come in and, and so, you know, if I could pop out a memory expansion and enable expansion, you know, I can get that at incredibly high gross margin.

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So I think that's really where, you know, a lot of the focus is right now, I think the developers are still kind of, you know, they're still circling a little bit. I think, you know, in terms of how we're seeing developers, enhance the sophistication of the product they're bringing to market. And I think psychographics are a really big piece of that.

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You know, something that we spent a long time putting together, but finally got it. And I'm so excited about it's kind of age by income, by psychographic. That's something that really doesn't exist anywhere else in the market. So now if you think about it, you know, a lot of the psychographics are interesting, but they're kind of broad categories.

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But now what we can do is area in this 15 minute drive time or this 20 minute drive time, you know, here are the specific personas who have, you know, the age and the income qualification, which, you know, you kind of can't lose sight of. And now I can really think about how I amenities my buildings, how I, how I position the units, and then how I strategically kind of approach the market.

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And so I think that this cycle, you know, it's going to be something that historically nobody has really been able to use or take advantage of. And I think now that's something that you can get that answering, you know, two clicks of a mouse. And so I think that's going to dramatically kind of and that's going to allow us to far more effectively tailor the product we deliver to the market, than we've been able to in the past.

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07:40 - 08:23

Josh Crisp

Interesting. So, we probably don't have time because I know you're very busy here at NIC to unpack all of what I'm about to ask you. Sure. But, you know, the three things that I've been hearing over the last year, everybody is talking about to some level, is value based care. Yep. active adult? Yep. And in the middle market?

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Yep. And not all in the same flair. But how is NIC MAP Vision kind of approaching? I'm sure developers are all coming like, hey, we want to be active adults. We need data on this. Hey, we want to tap into this sector of the middle market like we need data to support this and then likewise. So how do you guys approach that from the research that you're doing and compiling all this together? I mean, what's your approach?

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08:23 - 10:05

Arick Morton

we're very fortunate to have, you know, to be kind of affiliated with NIC. So obviously they have an entire research team that, you know, not only do a lot of work on that, but they also have, you know, the Harvard, Center for Housing in New York and kind of folks like that. We're bringing in big guns to the research side. So we're incredibly integrated there. And we try to kind of start from first principles on a lot of these questions. And then, you know, say, all right, well, “how does this system work?” And then if you're going to implement or actuate this system in our industry, what are the data needs?

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I mean, you kind of try to build up from first principles. so, you know, on a couple of things you asked about, you know, and value based care, we have and we have had, I mean, we, we can see inside of every senior housing property for all the, you know, good in terms of from a resident health care utilization perspective, we can provide that data. This is in our platform today, as well as what are the outcomes, you know, falls, acuity, all those sorts of things. And then Medicare spend and then, you know, we can also see all of the vendors who serve those communities already. So I think as people start to build, I think the biggest challenge thus far has been the industry, the health care side of the equation gobbles up that data.

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We  work with all of the value based care people, folks who are, you know, chasing that's based on the operator or the investor side. I think, you know, where there's still work to do is kind of creating the thesis and, and really understanding, okay, like, how do I want to build this into my business? So the data is all there. But what I found is that there's still a lot of people who are kind of trying to put together what that thesis looks like.

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10:05 - 10:15

Josh Crisp

That makes a lot of sense. So Lucas has a lot to talk about. I mean, NIC is booming right here. NIC MAP Vision is at the center of everything providing data to us. How does this impact what you're doing in the communities every day?

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10:15 - 10:57

Lucas McCurdy

I'm taking notes to take this back to my team. You know, obviously my time personally or in my day job is really spent on the repositioning and refreshing of existing communities. And, from my little data point, we've seen pretty big demand for that. And it's for all the reasons that you just mentioned.

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So final question. You know, I don't want to let you go before we talk very briefly or as briefly as you want to about rates. we're here in DC at the time of this recording. We've got an election coming up. There's, you know, the rates, everything. And so how much is that driving conversation today or is it just kind of like a good thing, a little thing that just happened and people are just moving forward? Or is it a big driver in conversation right now?

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10:57 - 12:57

Arick Morton

Yeah, I think a little bit of that depends on what your projection is. I mean, 50 bps is helpful. That doesn't really probably change the equation in many cases. I think the question is, you know, are we going to see another 100, 200, you know, where to where do we stop.

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I think the Fed has telegraphed that the market is certainly priced in the idea that there's going to be more than 50, you know, at least 150 or somewhere in that neighborhood. So I think at that point, you know, what that does for the industry is one that helps a lot of assets that got, you know, have debt on them that are at, you know, lower even though rates might come down. There's a lot of people looking at an interest rate increase. Right. Because, because they, you know, they put the debt on there in 2020 or 2021 when there was zero interest rate policy.

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So I think that that just helps kind of solve some of those problems. you know, so I think that's certainly impacting it. I think development is tough to pencil. And so, you know, 5000, 150 basis points on debt. I mean, the debt service on a development's probably, you know, one of the larger drivers of, Unlevered return, once you pack in all the, the interest reserves.

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And so I think, you know, I think that's going to help unlock some of that. And then I think if you're, you know, people, we're going to bet on cap rate compression, right? Because, you know, interest rates go down, you know, mathematically or kind of economically, you would expect cap rates to come down with them. you know, I think that's going to let people kind of say, well, you know, that's a little up close.

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But, you know, I think, I think we're going to get, you know, 50 or 100 bps of cap rate compression. And so if that happens, you know, I can make a good return on this. So, and then it also starts to solve some of the distress for the banks as those rates come down. That will make a lot of things in the banking sector that are tight right now, a little bit looser. So I think all in all, it will be a boon for the industry or helpful to the industry. I think the question is like how far, how low do they go?

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12:57 - 13:19

Josh Crisp

in the fact that we're having this conversation and you're having this conversation with all of these providers, it actually, I mean, it creates confidence and positive conversations that we've not really had a lot of great news over the last few years. So that's creating a buzz here, NIC, that I haven't seen in years. And it's a lot of fun, as not only looking in, but being in the industry. It's a lot of fun.

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13:19 - 13:42

Lucas McCurdy

Great information. Thank you so much for spending time with us. We're going to let you get back to your other meetings here in Washington, DC. and for all of our listeners that have been tuning in to this, there's a whole library of content from NIC MAP Vision within the BTG universe. Go to btgvoice.com, go to the search button and type NIC MAP Vision, and you pull up all the content related to data and trends

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13:42 - 14:08

Outro

Thanks for listening to Bridge the Gap podcast with Josh and Lucas. Connect with the network team and use your voice to influence the industry by connecting with us at btgvoice.com.

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