Middle CLASS ACT Erickson Retirement.

Back in the late '70s, when John Erickson owned and operated a string of golf course mobile home parks on Florida's Gulf Coast, it occurred to him that for every person who came south to retire, 20 stayed back in their home states. And most of them, he figured, would eventually reach the age--75, by his reckoning--when they would be better off moving into a community with social services than remaining at home.

Today, Erickson is chairman and CEO of Erickson Retirement Communities (formerly Senior Campus Living), one of the nation's largest, and certainly fastest-growing, developers of continuing care retirement communities. ERC's communities offer independent living, home health care, assisted living, and 24-hour nursing care. Equally important, they provide a setting that is physically attractive and designed to promote social interaction.

While most for-profit CCRC developers target the wealthy and super wealthy, Baltimore-based ERC goes after the middle class, specifically retired homeowners with yearly incomes of $15,000. The typical resident sells his or her home and uses the equity as a deposit on a studio, one-, or two-bedroom apartment. The entrance deposits, which are fully refundable, start at $150,000. The monthly fee for independent living is about $1,500.

One reason the firm can offer such an affordable product is the size of its communities. ERC's prototype campus contains 1,500 units of independent living, 200 assisted living units, and 300 skilled nursing units.

Their size also keeps competitors at bay. "The people in assisted living who are looking at a continuum are not going to get mainstream markets without economies of scale," says Erickson.

While it can be a challenge to find ample sites, get zoning approval, and obtain financing, these hurdles also serve to weed out competitors.

Another way ERC keeps costs down is through its no-frills design and cookie-cutter approach. "If people want tons of modifications, we show them the door," notes Kevin Glover, vice president, development services. "We keep residential buildings very straightforward. As for the community buildings, we want them to be nice, but not ostentatious. Middle-of-the-road fabrics and finishes work just fine."

Building big also enables ERC to offer an environment that's rich in opportunities for social interaction. If Erickson learned one thing from his days managing upscale mobile home parks, it's that seniors like to stay active. Surround them with other seniors with similar interests and they will play shuffleboard, golf, or bridge until the cows come home. He took that knowledge with him when he stepped into life care, where residents' average age may be 10 or 12 years older--the typical entry age is between 75 and 78, with an average age on a mature campus between 78 to 82 years--but their interests are similar.

ERC's communities, which operate at 98 percent daily capacity, are big enough to support choruses, bands, and drama programs. Its flagship Charlestown Retirement Community in Baltimore boasts 150 clubs; classes taught by visiting professors, a 10,000-volume lending library, a computer lab, and a closed-circuit television studio.

The more residents, the greater the likelihood of affinity groups. Tour the Charlestown campus and you'll see 20 white-haired women learning Japanese, or a group of retired Baltimore & Ohio engineers building a model railroad.

The residents' economic status is another reason the campus is a beehive of activity. Erickson recalls that when the late James Rouse, the developer responsible for Baltimore's Inner Harbor, toured Charlestown, what impressed him was how the middle-income market sustains itself "The poor and the wealthy both require massive support systems," he said. "Your market supports itself."

Economies of scale also help ERC provide extensive on-campus medical care. Charlestown's integrated care system includes six full-time geriatric physicians, two ambulances, and an emergency medical system staffed by security guards trained as paramedics. Eighty percent of its residents get their health care on campus. ERC entered into a risk-sharing agreement with Blue Cross and Blue Shield of Maryland, offering BCBS-MD's Medi-CareFirst managed care plan to its residents. The typical capitation for an 80-year-old woman is $550 a month.

Down the East Coast

Charlestown, ERC's first campus, is on the site of the former St. Charles Seminary College. Back in 1981 when Erickson was visiting his alma mater, Catholic University in nearby Washington, D.C., one of his former teachers mentioned that the seminary had recently closed. On the way to the airport, Erickson drove by the 110-acre site and thought it might be a good spot to build a retirement community.

Driving around the area, he noted a lot of 1950s housing, which signaled to him the presence of a lot of seniors. When he learned that the area was one of Sears' best markets, he knew his concept was going to sell. Charlestown opened its doors in 1983 and today boasts 2,500 residents, making it the country's largest CCRC. Since its founding, ERC has opened two more CCRCs in Maryland, and another three in Virginia, Michigan, and New Jersey. During the next two years, it will open three more in Maryland, New Jersey, and Massachusetts. Its goal is to open two communities a year during the next five years, for a total of 20,000 retirees.

ERC's growth plan is to "keep going up the I-95 corridor," says Erickson. "One third of the U.S. population is on the East Coast, so we're not going to run out of prospects."

Nor is ERC afraid of other companies horning in. "We've been doing it awhile. We have our formula down. We're not that concerned about competition," says COO Andrew Aldi.

A bigger challenge is "prying people from their homes," Aldi says. "It's very difficult to persuade someone who thinks she's independent but is, in fact, struggling day to day, to come here, where if she's sick, she can see a doctor, get a prescription, go back to her apartment, and have home health check on her, all in the same day," Aldi says. Then, he adds, "Not to mention enjoy the tonic effects of an enormous amount of social activities."

Welcome to the neighborhood

ERC's prototype community is 75 to 125 acres and strives for a college campus feel. Its 1,500 independent units are organized into three "neighborhoods" of 500 units each. Each neighborhood has a community building of 40,000 to 50,000 square feet, as well as courtyards and other public spaces to foster a sense of community.

Apartments range from 500-square-foot efficiencies to deluxe 1,750-square-foot, two-bedrooms. Each of the community buildings has a dining room, a living room, game rooms, a beauty salon, and a convenience store.

ERC tries to give each neighborhood a different look. A cluster in a wooded area might have a Frank Lloyd Wright feel, for example. Variety is not only the spice of life, but it helps residents navigate their surroundings better. ERC encourages residents to explore other neighborhoods, which are linked by climate-controlled corridors alive with plants cared for by residents. By venturing out, residents have a choice of three major dining rooms and two secondary eateries, called terrace rooms. In addition, each neighborhood has something that is one of a kind: an auditorium, a medical clinic, a health club, an aquatic center.

Assisted living and skilled nursing residents are not isolated from their more active counterparts. That way, spouses who have been separated by health issues can at least see each other easily (even in skilled nursing, visitors are always allowed). Similarly, the independent resident who returns from the hospital and requires some short-term rehab remains connected to his friends.

The seminary buildings located on the Charlestown campus, including a magnificent chapel that is on the national register of historic places, raised the bar design-wise. "We had some pretty forceful architecture to relate to," says Glover. "As we added onto it, we developed a style that borrows from or alludes to the original buildings, which are Romanesque."

Although ERC's signature look is six-story, red-brick buildings, the company likes to complement the surrounding community. Its Tinton Falls, N.J., campus has a Victorian feel characteristic of Jersey shore architecture. Its Virginia campus incorporates certain Southern design elements.

Pump boys

Financing these behemoths, which average 2.2 million square feet and cost about $75 million to launch, hasn't been easy. "Lenders like to have all their money paid back in three years," Erickson says. "Our projects take six to seven, from groundbreaking to fill-up," a span of time in which "lenders expect the world to end once and the sky to fall twice."

His track record counts for something, but not as much as you'd expect. "I'm on my eighth project, and it's still a real slugfest," says Erickson, explaining that, like the first successful shopping malls, which lenders considered to be flukes and aberrations, CCRCs have yet to prove their staying power.

Still, Erickson has gotten banks to back off their usual requirement that a CCRC presell 80 percent of its units before getting a dime. Erickson tells lenders to think of his communities "like an oil well where you put a hole in the ground and then pump for a long time. We take a giant site and tell the lender that if we can just start the pipeline flowing, we can prove the market is there. We set as our goal 20 net reservations a month and 40 brochure requests. If we can maintain that, we can stay in the market forever.

"So while our lenders also require preselling," Erickson continues, "the difference in our case is if we presell 70 percent of one building, they'll advance us money for the next one--as long as we keep new applicants signing up."

ERC's primary lender is Mercantile Bank in Maryland. It also has syndicated construction loans led by PNC and Fleet, and entered into a joint venture with Lend Lease Real Estate Investment in Australia that is financing two of its existing facilities.

But ERC has no interest in tapping the public equity market. "The Wall Street people say, 'you'll have all the money in the world.' But it's not what we're about" says Aldi. "The pressure to make quarterly earnings would betray our development strategy of building in a logical time sequence-- according to demand," he says. "Also, our primary objective is to give residents the best possible service at the lowest possible cost, and that's not consistent with a public company. I'm sure Marriott would disagree."

The man with the plan

Erickson deserves enormous credit for the company's success. "John is a very creative guy," says Aldi. "I'd even say brilliant in terms of his ideas, including the economies of scale he has achieved and the 100 percent refundable entry deposit policy," he says.

One in a family of 11 boys and three girls, Erickson became an "extremely competent person to get noticed," theorizes his brother Michael, who is ERC's executive vice president of marketing. "He understands engineering, architecture, a fair amount of medicine, law, and human nature. Put them all together and he understands what makes a community work--for residents and staff alike.

"Oh yeah, and did I mention he has a tremendous amount of energy and is mechanically inclined," adds Michael, who recalls a camping trip a few years back for ERC's top executives and their families. While most of the adults were still trying to rouse themselves from bed, Erickson was already in front of his motor home, surrounded by kids, repairing bicycles. "He could probably take a car engine apart and put it back together," says Michael, noting that Erickson was so dissatisfied with the ability of his last yacht to weather the frequent crossings he makes between Florida and the Bahamas that, with the help of a ship architect, he designed a more stable vessel. More on point, Erickson came up with an ingenious design for the swimming pool at Charlestown that obviates the need for a wheelchair lift.

But he's also a people person, and it's reflected in the type of operation he runs. "I walked the halls with Erickson and he knows the names of all the residents," says Dan Gold, president of LCOR Senior Living, McLean, Va.

Staff members also interact with residents constantly. A few years ago, ERC earned a place in the Guinness Book of World Records for the longest continuous performance of the Macarena: 1,000 residents at three sites and more than 300 employees danced for 40 minutes. In its Tinton Falls facility, ERG organized a millennial fitness challenge that pitted four residents and four staffers to see who could put the most miles on an exercise bicycle in 20 minutes. Residents came within seven miles of winning the tag team event.

ERC hasn't experienced the recruitment and retention issues that have plagued other long term care providers, both for frontline workers and corporate executives. One reason is that with 1,300 to 1,400 staffers per campus, ERC can put together career ladders. An employee can start at $6.50 an hour and four years later be in a position that pays $10 or $11.

To induce high school students to work part-time in food services, ERC rewards those who hang in for two years with scholarship money. And it's not even ERC's money: In lieu of tipping--prohibited to prevent favored treatment--residents are encouraged to contribute to a scholarship fund, which has doled out more than $100,000 to 60 students workers.

Executives also hang around. ERC's senior and executive vice presidents have been with the company an average of about 10 years. "It's not like working for an airline where people shout at you when the planes are late," says Erickson. "It's gratifying work."

Echoes Aldi, "I worked in the real estate industry for almost 30 years. You build one building, you've built them all. Tenants try to beat your brains in. Here, people come up to you and say, 'You changed my life.' Could you make more money elsewhere? Probably, but you couldn't make the impact we make."

What's in a name?

The name "Senior Campus Living" seemed to say it all. But with the new millennium, the Baltimore-based chain of continuing care retirement communities felt a need to reaffirm its founding values by adopting a new moniker. And what better way to emphasize its ongoing commitment to customized resident service, affordable and independent retirement, and quality healthcare than to re-name the company after its founder, John Erickson. Sixteen years after starting the Baltimore, Md.-based company, Erickson remains actively involved not just in strategic planning but in day-to-day operations.

The decision to call the chain Erickson. Retirement Communities wasn't entirely about paying homage to the company's leader: brand building also figured in. Said spokesperson Mel Tansill: "We felt there were too many communities out there with 'senior' or 'retirement' in their names."