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Developing a CCRC: Stepping Stones to Success

March 1, 2004
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Tips on laying a solid foundation for an LTC diversification project by Douglas Powell
Developing a CCRC: Stepping stones to success

A step-by-step approach for saving time and money when developing a CCRC

BY DOUGLAS POWELL The "full continuum of care" has to be one of the most common phrases overheard in long-term care circles for the last several years now-and with good reason. Smart LTC providers have figured out that offering clients the option to truly "age in place" makes sense. It's the old commonsense advice: "Diversify, diversify, diversify." However, organizations thinking about developing a CCRC or expanding their current operations into a CCRC must bear in mind that this is a complex process. Developing a CCRC requires a high level of expertise, market knowledge, and sophistication. It requires a specialized approach to fi nancing, zoning, project management, and marketing.

It's not only important to follow the correct "processes," but it's also critical to follow them in the right order, to avoid costly errors and succeed in launching the community.

In broadest terms, here are some of the most important steps, in their proper order of execution:

1. Complete a market/feasibility study. Before doing anything, owners or not-for-profit sponsors of projects must evaluate market conditions, consumer demand, demographic trends, and competition, and then prepare realistic financial models to make sure "the numbers work." Obtaining information from an objective source is critical to making informed decisions.

2. Assemble a professional team. CCRCs typically require a host of lawyers, bankers, contractors, architects, engineers, and other professional vendors who are familiar with the CCRC market. You also might wish to hire a developer/consultant with experience in that market. The question then becomes, do you have the expertise to manage the development, marketing, financing, and construction? A growing number of sponsors and owners are turning o developer/consultants with experience in CCRC marketing to lead them through the process and provide special expertise. Many bankers are now requiring the use of such firms as a condition for financing. Experience, price, and "chemistry" are key factors in choosing the final team.

3. Secure and acquire the right site. If you are developing a new CCRC, finding and securing the right site often takes longer than anticipated. And, as with any business venture, the accessibility, convenience, and prestige of the location can be critical to your CCRC's success. There is no better key to long-term success than finding a site that meets the three most important real estate attributes: location, location, location.

4. Start the zoning/land use process.
Whether you're developing a new community or expanding an existing facility on existing property, this daunting process requires the help of experienced professionals. And because positive results can never be guaranteed, it helps to get this effort started early, so that any necessary shifts in design and usage can be incorporated more costeffectively into the final plan.

5. Commence initial architectural drawings. Since land use approval is a major risk hurdle, it's wise to limit the architects to the schematic drawings and sketches that are required to obtain zoning. The results of this approval process may require rethinking and reworking the original design.

6. Begin marketing. Presales are critical to the CCRC-development process and thus demand that marketing efforts be thought out clearly and started early. The developer/consultant usually manages the marketing process, and hires and trains the marketing team. This process takes time. A multimillion-dollar effort will rest on the shoulders of the individuals hired to "sell" the community. Keep your marketing team focused on generating leads through direct mail, advertising, and public relations, and your sales team focused on sales.

7. Hire a construction manager. It makes sense to bring aboard-early on-a representative of the firm that will construct your community. The knowledge he or she possesses will offer insights into construction costs, system selection, and constructability and can head off problems before they arise. In successful projects, the construction manager works hand in hand with the entire project team throughout the design process.

8. Set prices. Pricing will immediately dictate (and potentially exclude) the types of clients/residents a CCRC will attract. Price points are critical to the marketing effort; prices must match the market. Making a wrong decision in this area can effectively preclude some units from being good sellers. Also, prices must be set at a level that supports financial feasibility. Balancing prices the market will accept with financial feasibility is a delicate task. If prices are set too high, marketing will take longer and cost more. In the extreme, the project could fail. Prices set too low weaken the fi nancial model. An outside developer/consultant with deep expertise in CCRC marketing may be particularly helpful in offering advice on how to proceed in this area.