Altus Feasibility Study (pdf) - Maison Senior Living

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4904 ‐ 4920 Elbow Drive, Calgary, AB Milliken Developments October 28, 2010 Despite wavering employment conditions, housing starts have continued to improve. In the second quarter, housing starts were almost double the level experienced in the same period in the previous year. However, there are signs that the housing market in Calgary is set to cool, as the number of newly completed and unabsorbed row and apartment units continues to increase and existing home sales have started to decline. However despite these risks, the Calgary housing market should continue to benefit from improved affordability as both new and existing house prices are below their pre‐recessionary peaks. Also, the region continues to have one of the strongest population growth rates of any large metropolitan area in Canada, which bodes well for market fundamentals. After experiencing double digit increases between 2004 and 2008, spending on non‐residential building construction has continued to decline. Activity in non‐residential construction was 1.9% lower in the second quarter of 2010 compared to the previous quarter, on a seasonally adjusted basis. However, despite these lower levels of construction spending there are some large projects in the pipeline, including the expansion of the Calgary Airport, which is expected to cost $45 million and be finished in 2013. Also, uncertainty surrounding future regulations for deep‐sea drilling could shift more investment to the Alberta oil and gas sectors and the region should experience spin‐off benefits associated with higher levels of investment. Although there is up‐side potential due to the possibility of increased spending in the oil and gas sectors, wavering employment conditions and a fragile U.S. recovery could dampen the recovery. 10
4904 ‐ 4920 Elbow Drive, Calgary, AB Milliken Developments October 28, 2010 SENIORS MARKET EVOLUTION & HISTORIC OVERVIEW Historically, the American seniors housing industry has been considered to be a decade in advance of the Canadian industry simply by virtue of the fundamental difference in the health care delivery systems in the two countries. This gap has closed considerably as today the two countries are operating on virtually identical marketplace premises. In Canada, the Federal Government’s commitment to a universal public health care system drove the retirement and health care industry to revolve principally around an institutional model with uniformly consistent products that were more nursing home like than hospitality. Investors in the industry were largely small local “mom and pop” entities. It is no coincidence that the vast majority of the existing inventory of projects (both public and private) developed across Canada before about 1995 are characterized by a preponderance of small bed‐sitting rooms, limited amenity spaces and cafeteria quality meal facilities, which are appropriate for a care model but not an independent model. In the US, the existence of strong private sector involvement in health care has driven investors, developers and operators to create distinctly different housing and health care options. Much of the evolution of products such as condominiums for seniors, campus style continuing care retirement communities, life‐care residences and stand‐ alone lifestyle rental retirement residences have evolved from a fundamental understanding of the quality and customer service expectation in the private pay realm. Although there have been legacies of large, institutional nursing home owners and operators such as Beverly and Hillhaven, the rapid evolution of the lifestyle retirement industry was propelled by companies such as Sunrise and Marriott in the 1980’s which demonstrated that the business could be as much about “want” as about “need.” Customer service in the business of caring for seniors had thus proven to be a bona fide philosophy for profitability. In the 1990’s the nursing home sector began to feel the burden of customer expectation and out of this turmoil evolved the assisted living industry. This evolution blended the best of both nursing and lifestyle retirement living into a new service product that now placed a high premium on meeting the expectations of not only the seniors who were the residents, but also on meeting the expectations of the adult children of the seniors who were lynchpins in the decision making process for private pay nursing services. Success in this new paradigm required developers and operators to create buildings and unbundled services more into a menu instead of the one‐size‐fits‐all philosophies of the past. Indeed, the Baby Boomer adult children of seniors had become of paramount importance. Companies such as Sunrise <strong>Senior</strong> <strong>Living</strong> were spawned from this revolution and as the market accepted these products, the capital markets began to feel more comfortable with these products and companies. In Canada, it took until the late 1990’s for the capital markets to become comfortable with the appeal and profitability of the seniors housing sector. Apart from Extendicare and its focus on nursing homes, the launch of the Central Park Lodges LTC REIT in 1997 precipitated and paved the way to the public markets for companies such as Amica, Chartwell, Sunrise and CPAC. Interestingly, these companies have one thing in common; they are all committed in some degree to the principles of customer service in their residence development and operating models. These public companies, especially the large REITs, have both funded and private‐pay residences in their portfolios as expected in the Canadian context. 11
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Altus Feasibility Study (pdf) - Maison Senior Living

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