Residents of Sunrise Senior Living’s two Manhattan buildings get Juilliard students as teachers and performers, visiting artists in on-site studios, and Broadway tickets that come with a backstage talk afterward. The rate for assisted living runs roughly $10,000 a month. That’s before the add-on care services — which are, after all, the reason most people move into assisted living in the first place. Now an investment firm with roots in Michael Dell’s family office is paying more than $1 billion for a majority of the company, and Peter Grant’s Property Report in Wednesday’s Journal explains why: the boomers are finally arriving, and there aren’t enough rooms.
BDT & MSD Partners is buying its stake from Canada’s Public Sector Pension Investment Board; senior leadership keeps the rest. Sunrise, founded in 1981 by a husband and wife who lived alongside their first residents in Oakton, Va., is the fifth-largest senior-housing operator in North America, with more than 230 communities and more than 22,000 residents. It owns fewer than a quarter of them and earns management fees on the rest, which is the growth plan: pair Sunrise’s care operation with BDT & MSD’s luxury-hotel résumé — The Boca Raton, Four Seasons Hualalai, a stake in Auberge — and win more contracts at the top of the market.
The arithmetic of a shortage
The demand side is demographics doing what demographics do. The baby boom began 80 years ago and produced about 76 million U.S. births through 1964. “The silver tsunami has been a topic since 1998,” BDT & MSD’s Coburn Packard told Grant; the difference now is that it’s happening. Occupancy across 31 major metro markets hit a postpandemic high of 90.4% in the third quarter, per NIC MAP, and assisted-living occupancy reached 89.1% from below 74% at the pandemic low. Most Sunrise communities are more than 90% full, many with waitlists. NIC MAP projects a shortage of more than 575,000 senior-housing units by 2030 as the 80-and-over population grows by about a third. Sunrise has a pipeline of more than 50 communities at an estimated $7.5 billion, starting six or seven a year now and aiming for 10 a year by 2030. The headwinds are real — inflation, high rates, staffing shortages, and technology that lets people stay home longer — but none of them makes a room cheaper.
Do the household math. Roughly $10,000 a month is about $120,000 a year, before memory care or any care tier at all, before the apartment upgrade, before the second spouse. A shortage of more than half a million units isn’t a setting in which operators compete on price, and that’s the part a retirement plan has to carry.
Our read
This is Retirement · M10 and Health Costs, and the lens is Insurance · M11: long-term care is the biggest unfunded line in most retirement plans, and this story prices it. Sunrise is the top of the market, but the shape of the bill is the same everywhere — a monthly room-and-board number that runs for years, plus care that scales up as you need more of it. Decide now which bucket pays. There aren’t many candidates: a traditional or hybrid long-term-care policy, a dedicated self-funding reserve, home equity, or the kids. Each has a cost; pretending the question away has the biggest one, because it lands on a spouse at the worst possible moment.
The REITs that own this kind of real estate — Welltower (WELL), Ventas (VTR) — aren’t held here, and a stock isn’t a care plan anyway. The planning move is a named funding source and an honest number: at $10,000 a month, how many months can the plan carry, and from where? That’s the conversation to have while everyone’s healthy enough to find it boring — it doesn’t get easier once somebody needs the room.