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Harrison Street, Watermark: Investors, Consumers Raise Bar On How Senior Living Buildings Promote Wellness

Improving air quality and tightening infection control standards for senior housing became paramount in the throes of the Covid-19 pandemic.

Now, the bar has been raised on how a senior living environment can and should foster health and wellness for senior living residents and workers.

Two players in the space, private equity firm Harrison Street and operator Watermark Retirement, are using the perspective gained to improve the standards of their portfolios.

And the improved standards may impact the bottom line as well as the daily lives of residents.

“We’re at a point where we can’t use Covid as an excuse anymore. We need to start thinking about how we can really thrive in whatever this new normal is,” said Harrison Street Chief Impact Officer Jill Brosig at the 2021 Senior Housing News BUILD event in Chicago.

That new normal will likely include improved design standards and a continued effort to attain various building certifications.

Earlier this year, Harrison Street announced a goal of earning Fitwel certification across more than 500 properties including many in senior housing, as reported by SHN.

Among Harrison Street’s operating partners is Tucson, Arizona-based Watermark. Chairman David Freshwater announced an ambitious goal at the 2020 Senior Housing News BUILD virtual event, wherein he said the operator aims to be the “Tesla of senior housing” by pursuing “precision wellness.”

One year later, at the recent BUILD 2021, Watermark Chief Investment Officer Bryan Schachter spoke on health and wellness updates. As Watermark builds out its luxury Elan Collection of communities, the company is incorporating innovative wellness-oriented features, while also pursuing healthy buildings at other price points.

Certifications and design

Fitwel is a healthy building certification that was created by the Centers for Disease Control and Prevention (CDC) and the General Services Administration (GSA). The Center for Active Design (CfAD) took over the Fitwel program from the CDC.

Harrison Street approached Fitwel more than three years ago to learn more about the Fitwel standards for buildings such as offices. Leaders with the private equity firm realized that the standards were not a perfect fit for senior housing.

“There were standards in there such as encouraging people to walk up and down the stairs, or to walk for a distance away from your building,” said Brosig. “We didn’t think that applied well to someone in a wheelchair or someone that might have dementia.”

The firm then worked with Fitwel for months to create a scorecard meant for the senior housing space but didn’t take away from the intent of the CDC’s original certification.

In February 2021, Fitwel announced there was a new commercially available Fitwel healthy building scorecard made specifically for senior spaces.

Currently, more than 200 Harrison Street buildings have earned Fitwel certification, surpassing its goal of 200 by the end of 2021. Of those, approximately 65% are senior living communities, according to Brosig.

To attain such a certification, buildings must address certain standards for indoor air quality, lighting, walkability, access to healthy foods, comfort and temperature, and other factors.

As a Harrison Street partner, Watermark is part of the effort to attain Fitwel certification — but Fitwel is not the only healthy building standard out there, and the operator’s other capital partners have their own expectations and preferred frameworks baked into management agreements.

Watermark Chief Investment Officer Bryan Schachter

Watermark works with such firms as Kayne Anderson, Goldman Sachs, Prudential, Intercontinental, Welltower, and Harrison Street.

“I would say that Harrison Street has been the most specific with regard to ESG [environmental, social, governance] expectations,” said Schachter. “But we have started to field those questions and understand what needs to be implemented moving forward.”

The bottom line

The reasoning behind Harrison Street’s goal of 500 healthy building certifications is twofold:

  • A certification with CDC roots is a competitive advantage.
  • Harrison Street wants to set a portfolio-wide standard.

“If [our properties] are able to advertise to tenants and staff and residents that this building has been blessed by the CDC as being healthy, we thought that was a powerful differentiator,” Brosig said.

But in addition to market differentiation, increasing focus on ESG among investors also motivated the push for certification.

“There’s a lot more pressure from our investors,” said Brosig. “They want us to do ESG, but they also want us to demonstrate that there is some ROI.”

Harrison Street solicited research help from the Massachusetts Institute of Technology (MIT). MIT found that health certification has value.

The MIT research suggests that operators can charge 4%-7% more rent per square foot in buildings that boast a health certification compared with buildings that don’t have a similar certification, according to Brosig, who made it clear that her aim is not to improve standards so as to raise the price of rent.

“But it demonstrates that there’s a value there,” she said.

Measuring the exact ROI of certain wellness-related building features is difficult, Schachter pointed out. For instance, Watermark’s recently opened Brooklyn Heights community includes “experiential gardens” for memory care — it’s hard to pinpoint the return on that investment. Other Watermark communities include stables for equine therapy, which the provider viewed as a potential loss leader, but also a market differentiator that would drive demand.

“We’re doing some things that residents didn’t expect us to do in the past,” Schacter said.

Innovation and collaboration

Watermark aims to deliver on its wellness initiatives for the middle market and projects in secondary and tertiary markets, as well as its higher-end products.

“There are certainly some challenges in a more affordable product,” said Schachter.

From an operational perspective, it’s important to focus not on what can’t be done, but what can be done to hit on the initiative that the company is trying to deliver in our higher-end products, he said.

One example is how a single change in a resident’s medication can impact other areas of their life. The solution for Watermark is dedicated staff members focused on wellness-related issues — essentially, a wellness coach. In higher-end communities, that might be a higher-level position, whereas the profile of that role might be somewhat different in a more moderately priced community.

Harrison Street’s Jill Brosig and Watermark’s Bryan Schachter

Harrison Street is also aiming to help detect medical changes within its resident population.

“We’re using a new tool – an AI tool – that allows you to detect and predict cognitive health,” said Brosig. “This could be anything from Alzheimer’s and dementia to PTSD, depression, or schizophrenia.”

The AI can detect the change and alert caregivers and give the staff the ability to be proactive in their care.

Harrison Street works with more than 70 operating partners, more than a third of which are in the senior housing space and all of which are in their own specific phase of their business life. So, it’s a unique challenge to implement a particular healthy building standard across all these different types of enterprises.

Harrison Street wants to assist in any way possible, so the firm holds an annual conference to discuss best practices and collectively work through the challenges that they’re facing including the movement toward ESG standards.

But, the investment firm doesn’t force certifications on any of its operating partners, she pointed out. The firm may “strongly encourage” certification but is also cognizant of the need for effective change management, Brosig said.

“We want them to feel that they’re a part of it,” she said.

The post Harrison Street, Watermark: Investors, Consumers Raise Bar On How Senior Living Buildings Promote Wellness appeared first on Senior Housing News.

Source: For the full article please visit Senior Housing News

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