You make some good points about the due diligence that one should do when evaluating CCRCs. However, I might add that no amount of due diligence will ensure that occupancy levels won't adversely change in the future; that the medical facility that appeared to be 5 Star quality and exceptional becomes a dive in the future when you need it or has limited capacity (and I have encountered this with a luxury level CCRC that consigns overflow patients/residents to another skilled nursing facility) that cannot meet the needs of a growing infirm population; that the food quality won't deteriorate because food staff is always looking for a better place to work; or that the plant facilities become obsolete with age. I don't mean to sound like a naysayer about CCRCs, but I'm convinced that only luxury/resort type levels of CCRCs, with strong financial bones and residents who can also augment the financial standing of the CCRC, are the only type of CCRCs that provide real peace and comfort in handling Life Cycle care for the long haul. Everything else is really marked by greater uncertainty.
Initial entrance fees, up to a point, are refundable. But let's say you have a Type A entrance fee of $450K, with a monthly maintenance fee for a husband and wife couple of $5K. After 18 months in many CCRCs that entrance fee is typically history and non-refundable.
I'm more inclined to look at hybrid type B or C Life Cycle CCRCs, with equity ownership in residential units, as these plans would dovetail with my LTCi in case I needed asssited living or skilled nursing care, but still these entrance fees in the type B or C places I have seen are 10 percent of the price of the units you buy, which result in entrance fees ranging from $180K to $40K -- with monthly maintenance fees of $5K plus.
Well raised points.
That is why how long the CCRC has been in existence and how they have managed the funds, growth, new buildings, new medical facilities, new amenities etc. are some of the factors to look at. The Occupancy level below 92% is a flag. A one-year blip (like in 2008) is OK but not otherwise.
Mylifesite dot net provides due diligence on the financial side and the fee for that service is worth spending. Fitch rating of A or higher is very important. I think only 5 non-profits in the country have that.
Regardless of the Type - A, B or C the entrance fee would depend on the size and amenities of the Villa, Townhome, or Condo for the independent living.
I will share my research and why we chose what we chose (warning – bit long to read but useful!)
We are moving to Willow Valley Communities, in Lancaster, PA (PA has no state income tax for the retirement income - Pension, SS, RMD etc.). They have 2,500 residents and 1400 employees.
The entrance fee at Willow Valley starts from $99K (~800 Sq ft. - Studio) to $500K (2 bedrooms, 2.5 baths, plus a den - about 2500 Sq ft.) The monthly (with food plan) can be from $2,500 to $6,000 (lower if single). Monthly does increase about 3-3.5% every year. One can opt out of the food plan (we plan to).
They have (like many) two other options 33% and 90% refundable but the cost is higher by ~28% to 80% higher. Our kids have enough and will have much more than we did when they retire so we decided to go for the non-refundable and we would use that money for fun, travel, charity, and investment ourselves! The breakeven point (6%) growth) was about 15 years - so the option you choose depends on your net worth, liquidity, your age, longevity (who knows!) etc. Most have chosen non-refundable. some 10% (of 2,500 residents) have chosen refundable but they are likely to be those who moved in there some 25-30 years ago.
Type B and Type C would have lower monthly fees since they will charge either discounted or the market rate cost of the Care IF and WHEN you need. But then (our logic) why would not I take a chance and stay where I am in a 55 + retirement community anyway and move to Assisted Living or Nursing home if and when I need it vs. paying non-refundable entrance fees and the monthly?
The website must be transparent – WV has pricing on the website along with all the layout (90 floor plans) before you even call them. Most don’t have that available easily.
We downsized from 3500 Sq ft to 1,800 Sq ft condo 11 years ago by moving to a 55 plus retirement community so we decided that we can still go lower with an option to change to higher Sq ft and higher price or to a still smaller when one of us passes away if so desired.
Of course, we paid the entrance fees but then I consider that if I rent a 2-bedrooms, 2 baths condo in NJ it would cost me $2,000 - $2,500 / month anyway so if we live for 10 years that entrance fee has covered our rent!
Our Monthly fee is $3,500 (w/o food plan). Considering that it would have cost us $2,500/month (our age 73.72) for a lifetime LTC of $125K anyway, I think that we get a good deal of amenities for $1,000/month more. No Utilities, no HOA fees, no mortgage, no property tax, no club fees etc. Normal routine maintenance is included – no handyman service needed.
Plus we can not get LTC even if we wanted because I am prediabetic and my wife has Stage 4 metastatic colon cancer.
Condos get housekeeping at $25/hr, villas and townhomes do not pay extra. Before we move in, our unit (though it is temporary if we decide to take the move option) gets new appliances, new carpet, new lighting, new wood floor, new carpet, new bathrooms, new paint etc. as part of the entrance fee. Every 10 years one gets the same renovation for free. Every building gets the renovation every 10 years also!
We took 1,200 Sq ft, 2 BDRM, 1.5 baths for an entrance fee of $245K. This has 2% per month declining so after 4 years it is zero refundable.
In 1-2 years, one would know whether this is for them or not. We stayed five times and met with 12 resident couples. Only regret that they all had was that they should have moved in earlier!
It is 201+ acres campus with townhomes, Villas, and six Condo buildings. Eleven dining rooms - some with Executive Chefs that require reservations. Two Clubhouses with large gyms, swimming pools, Bowling alley, Golf Simulator, video arcade, a modern 500 seat auditorium, classroom, conference rooms, Ballroom dance floor etc. Every building has a library, Dining Hall (some have two), Gym etc. Our building has 400 + apartments with Swimming Pool, Hot Tub, Billiards, Table Tennis, Woodshop, Model railroad shop, Art studio, 200+ seat auditorium, PNC Bank with safe deposit vault, a Pharmacy, a café, hair salon, spa and more. One out of four (The Glen) medical buildings is attached so just have to walk over from inside the building. A new memory ward is being built with the community concept. They just built new Vista Condos last year and in two years another building is planned.
A 7-course Golf course is free and 14-hole course club membership is $100/year with $25 for a 9-hole fee.
There is NO shortcut to choosing a good CCRC. I read 5 books, spent ~200 hrs. on the net and visited, talked to 10 CCRC and many residents before choosing Willow Valley. CON – we will be in the same cold weather as in NJ but like others, we will be snowbird as long as the body is capable of traveling! After that with all amenities in the building, we won’t need to run away in the winter.
Remember, it takes time to do due diligence and you have to be on the waiting list to get the unit that you want, and it may take several months to several years to get it.
So, plan ahead! For us, this is the last and final (but new and exciting) chapter of our life so the research was well worth it.
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Seriously, all this proves is that the CCRC industry is not suffering from major catastrophe. Sure many insurers have exited the LTCi market, but this only proves they stopped underwriting the product. Likewise, the fact that the CCRC might be "stable" despite big players like Erickson or HCR Manor, weaving in, out and around Chapter 11 Bankrutpcy does give one pause about the state of this stability as mentioned by "rating agencies" like Fitch who might be more like cheerleaders for an industry than dispassionate research analysts -- we know how these rating agencies in the Great Recession performed
