NIC reveals trends for senior living industry.

A record crowd of 680 lenders, investors and facility owners/ operators recently met in Washington, DC, to explore how health care reforms will affect the financing of housing/health services for aging America.

The consensus at the third annual National Investment Conference for the Senior Living and Long Term Care Industries (NIC) was that more capital will flow to this industry, yet on a selective basis.

"The turnout of top executives from Wall Street firms and key capital markets is a testament to the level of interest in this niche," said conference chairman Bob Eramian, of Healthcare Concepts Inc. in Atlanta, Georgia. "This event signaled that the pipeline for funding is open, but selectively to companies that are positioned to provide housing/health services with greater consumer flexibility and cost-containment in mind."

Industry leaders share a variety of predictions about which industry segments would win or lose due to health care reforms, and what financing vehicle would carry the day:

* Assisted living was declared a big winner due to its growing consumer acceptance, fewer regulations and lower cost compared to traditional care. However, many echoed a caution by Chris Coates, president and COO of American Retirement Corporation in Brentwood, Tennessee: "If too many inexperienced providers jump in the assisted living bandwagon, we could see problems similar to the overbuilding of congregate facilities in the '80s."

* Traditional nursing homes that do not diversify their services packages or patient mix will lose market share to lower cost, specialty care providers, and ultimately cease to exist.

* Harvard Business School professor and health care reform expert Regina Herzlinger says expensive, acute care hospitals are "dinosaurs." She encouraged entrepreneurs to practice "niching" and develop "focused factories" - facilities that concentrate on providing highly specialized care with great cost-efficiency.

* There is a growing trend toward the creation of dominant providers who have "seamless services." These single organizations allow consumers to enter, move within and exit their system at a variety of levels., from non-medical retirement housing to highly technicaL, specialized care. Thus, the organization captures customers and generates revenue at each level.

* There was general consensus that high-end congregate communities and non-health care entities may be losers in the immediate future. Also, there is a compelling need for the industry to create new housing/health arrangements for low to moderate income seniors.

Emerging financing techniques and investment activities discussed at NIC '93 revealed encouraging news for the industry:

* As other real estate markets remain flat, new and larger financiers are entering the field. "We've formed a dedicated product team within our capital markets group to place strategic investments in senior living," said Jeff Malehorn of GE Capital.

* Permanent and acquisition financing through the use of securitization is on the upswing, as evidenced by recent transactions involving Daiwa Securities and Nomura Securities. "Right now, we're very bullish on refinancing facilities," says Ray Anthony, vice president of Nomura Securities

* Pension funds are also getting into the business, as demonstrated by the Kansas Employees Retirement System's investment in Retirement Management Company through Morris, Andersen Investments Advisors.

* Major Health Care REITs are poised to invest in the field, particularly in assisted living. Bruce Andrews, CEO of Nationwide Health Properties, said his firm is planning investment beyond traditional nursing homes.

* Fresh off the purchase of The Forum Group, Robert Whitman of the Hampstead Group told the NIC crowd his firm is soon looking to place an additional $200 million in the industry.

Funds from NIC '93 are being used to conduct research that stimulates capital formation for the senior living and long term care industries. For information about this research, or the NIC '94 conference next October, call [phone].