These Contract Types Are Losing Favor In CCRCs

April 16, 2017, Mary Kate Nelson, Senior Housing News -  Plenty has changed in the senior housing industry since the bad old economy of 2007—including the pricing approaches taken by continuing care retirement communities (CCRCs).  Since 2007, the use of Type A and Type C contracts is up among nonprofit CCRCs, but the use of Type B and rental contracts is down, according to recently released data from Chicago-based specialty investment bank Ziegler.

Ziegler surveyed a total of 145 senior living financial officers and CFOs nationwide for the March edition of its Ziegler CFO Hotline report. Approximately 35% of the respondents were from multi-site organizations; the remaining 65% were from single-site organizations.  The use of Type B contracts declined 10.5% from 2017 to 2007, while the use of rental contracts declined 5.6%.

Approximately 44% of the respondents’ communities currently offer one contract type, while 40.6% offer two contract types, the data show.  Among providers offering more than one contract type, the most common combination is Type A as the primary and Type C as the secondary, the data show. About 34% of respondents said their CCRC offers this mix.

Just 4% of respondents said their CCRC offers all four contract types.

When it comes to the types of entry-fee contracts offered, the responses were all over the board.

About 80.7% of respondents said their CCRC offers a partially-refundable entry-fee contract, and 68.3% said their CCRC offers a fully-declining contract. Just 11.7% said their CCRC offers a fully-refundable entry-fee plan.

Among respondents whose communities offer a fully-refundable contract, residents prefer a partially refundable or fully declining plan by almost 4 to 1, Ziegler noted.  The most common contract out of all partially-refundable plans is 90% refundable, followed by a 50% refundable plan.

Presently, it’s most common for CCRCs to refund entry fees once a unit is re-occupied, the data show. 

Just under 56% of respondents said that their CCRC refunds entry fees when the unit is re-occupied.  Over 30% of providers, meanwhile, refund the entry fees after a certain period of time, irrespective of whether a unit is eventually re-occupied.