Energy Costs Senior living communities have good rea-
son to be mindful of energy expenses. Al- ready a major cost center, power is expected to get more expensive in the coming year, with electricity rising 1.2 percent nationally and as much as 4.2 percent by region, ac- cording to the “Key Economic Indicators: 2018 Trends and Forecasts for Labor, Food, Utilities” report. In order to minimize energy costs,
Brightview Senior Living swaps in LEDs for conventional lighting any time a prop- erty comes up for renovation. The senior living provider does this not only because it makes economic sense, but also to se- cure LEED certification, a mark of a green-friendly building. “They last longer and use far less energy than traditional lighting, and the market has changed to where they are now competitive- ly priced,” said Kristian Spannhake, project director at Brightview. “As an owner-devel- oper, we look at the cost today against the replacement cost. We want a building that runs as cost-effectively as possible and LEDs accomplish that. They are energy efficient now, and because they have a 20-year lifes- pan, we are not spending money later on new bulbs or the labor associated with re- placing bulbs.” Energy experts say it makes sense to go
after lighting first—it’s a big line item on the energy bill. “Five years ago, people assumed energy efficiency meant you had to have a glaring blue light in the hallway. Three years ago, LED solved that,” said Kevin Siebrecht, president of Greenleaf Energy Solutions, noting that in addition to delivering a 30 percent return on investment, today’s LED replacement projects also provide high-end features such as dimming capability and im- proved light quality. These enhancements to lighting quality
have made LED significantly more attrac- tive to operators like Brightview. “As you develop for seniors you need to be cogni- zant of the impact of light on their eyes, which may be more sensitive than young- er eyes,” Spannhake said. “With LED you can get different temperature lights, and they are dimmable now, so you can really find that warmth.”
REITS TO THE RESCUE
When it comes to managing operational expenses, senior living companies don’t have to go it alone. Those who work with real estate investment trusts (REITs) can find capital for cost-cutting investments, support for joint purchasing initiatives, as well as expertise to help improve their management practices.
To get the REIT view, we asked Chris Cummings, senior vice president of asset management at Ventas and Mercedes Kerr, executive vice president of business & relationship management at Welltower, to highlight some of the ways they help operators keep costs under control.
• Capital investments. Ventas spends in support of green initiatives to make buildings operate more cost-effectively. Last year, the REIT invested $2 million in sustainability upgrades for 20 Sunrise Senior Living communities—up- grades that are shaving $450,000 a year off operating costs, Cummings said.
• Collective buying. Welltower’s partners can leverage their joint buying pow- er to obtain deals on food and beverage, carpeting, even a “room in a box” that pulls together all the items most frequently needed when re-occupying a room. They buy property insurance together, “and everybody who has opted in and purchased insurance through us has saved 15 percent,” Kerr said.
• Property tax appeals. You’d be surprised how often the government gets it wrong. Ventas experts routinely review tax assessments and appeal those that seem amiss. In 2016, successful appeals in 41 cases netted tax savings of over $4 million. “The large operators likely would do this, but a lot of smaller operators don’t think to do this or don’t have the resources,” Cummings said.
• Time management. Welltower has masses of information about the se- quencing of tasks and other factors that drive staffing decisions. The REIT will send in its experts to do a comprehensive analysis to help streamline operations. “We see a tremendous amount of power in the data that we have, as well as in the systems and the teams we have created to really leverage that data,” Kerr said.
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