in a lower level of care. However,
relatively few people require
what Oregon calls a nursing
home. So, if I apply the Oregon
definition, 70 percent of the U.S.
nursing home population could
Portfolio: Looking at another be placed in a lower level of care.
REIT sector, nine years ago you This lack of consistency makes
urged the seniors housing indus- it difficult to compare the per-try to standardize the definitions formance of nursing home A in
it uses for different property types. Washington with nursing home
Why did you focus on this issue? B in Oregon. They really are dif-
Anikeeff: If you can’t measure ferent businesses.
it, you can’t manage it. Why is When I first started look-it that a nursing home—the ing at the industry with Glenn
most restricted term in defin- Mueller, a real estate professor
ing seniors housing—provides at the University of Denver and
significantly different services in investment strategist for Divi-
different states? Let’s compare dend Capital Group, we were
nursing homes in Washington frustrated by the different terms
state and Oregon. If Washington for the different product types.
state’s definition is used, 15 per- He finally said let’s just call
cent of the overall U.S. nursing them A, B, C and D. A is for
home population could be placed real estate only, B for real estate
UBZ1182REPortfolioAd2 3/25/09 9:49 AM Page 1
and elsewhere. Therefore, domestic companies are expanding overseas, and foreign hotel companies
are seeking opportunities outside
their borders.
and hotel-like services, C offers
some assistance with activities
of daily living, and D involves
skilled nursing care. This was
a major step and, by using this
classification, he figured out
that the real estate accounted
for about the same amount of
the cost in each product but real
estate’s percentage of total cost
went down as the percentage
for services and medical treatment went up. In other words,
100 percent of the cost of an
apartment-type unit is for real
estate while only 25 percent of
the cost of a nursing home stay
is attributable to property. Both
may have the same real estate
cost, but nursing home beds are
four times as expensive. F
Christopher M. Wright is a regular
contributor to Portfolio.
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