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IDENTIFYING THE MOST CRITICAL PROJECTS FOR CAPITAL PLANNING “We just did a complete restoration


of our Autumn Leaves of Cypresswood community in Houston, Texas, and that was because we were flooded in Hurricane Harvey,” said LaSalle’s chairman, CEO, and co-owner Mitchell W. Warren. “We had 18 inches of water in our community, over $2 million worth of damage. Drywall below the handrail all came off, we put in all new flooring, we repainted the whole building, and refurnished the whole building.” This kind of spending can wreak havoc


on capex budgets. “The planned projects are the easiest because they are finite and you can estimate the cost. The hardest part of capex is the unexpected need, the AC unit that goes out, the boiler that goes out, the major repair that you weren’t expect- ing,” Lessard said. Senior living executives have learned to


expect the unexpected and to build in fail- safe mechanisms. “We allocate dollars to an ‘unplanned


budget’ so that we have some reserve to be able to take care of those things. But then you have to check in constantly throughout the year to see how quickly you are spending that down. If you are spending that faster than expected, it may mean that you put some planned projects on hold. So, there’s a balance there,” Lessard said.


3. Improved space utilization Sometimes a community will take on a major project not in order to dress up an existing space, but rather to reshape that space for some higher and better use. In 2016, Vi completed an $80-90 million


upgrade of a Naples, Fla. community. In addition to creating a new sales center, the


BEFORE


project replaced standalone independent living with an independent living building attached to a clubhouse, which marked the first time the company had ever sought to pair those two uses. “We felt that layout would be more appeal-


ing for residents who are attracted to having a shorter journey to the common spaces, so we would be able to attract a different cus- tomer than in the past,” Smith said. “The current residents love it, new prospects love it, occupancy is very strong. We sold out all 72 units and are working on a second phase to add new independent living units on the opposite side of the clubhouse, and those have already been pre-sold.” At Belmont Village, Lessard has been


pursuing a similar course, dramatically reshaping existing spaces to better accom- modate residents’ evolving tastes and needs. “We call them ‘community refreshes’ but they are more than just a refresh, more than just carpet paint and furniture,” he said. “We’ve had spaces dedicated to be ‘com-


puter rooms’ and now seniors have their own iPads, so in some communities we’ve combined the computer room with a bistro to make it more like a little coffee shop, and then converted the remaining space to more of a multi-purpose activity space,” he said. The ongoing trend toward higher res-


ident acuity also has driven remodeling efforts. In some communities the former ‘wellness office’ wasn’t big enough to ac- commodate the nurses’ growing workload. “You end up with med carts overflowing into the hallways,” Lessard said. “So, we have had a couple of situations where we’ve expanded the nursing office or moved it to another space.”


AFTER


Autumn Leaves of Cypresswood was flooded by Hurricane Harvey in 2017. These before and after photos show the aftermath of the storm in a community hallway and its completed restoration and renovation. (Photos courtesy of The LaSalle Group/ Autumn Leaves)


28 SENIOR LIVING EXECUTIVE SEPTEMBER/OCTOBER 2018


4. The competitive landscape For most senior living operators, the emerg- ing competitive landscape is an ever-present consideration, driving not only short-term marketing decisions but also long-term capex plans. There’s pressure to stay cur- rent, to offer a look and feel that is not only comfortable and functional, but also on par with the latest offerings. Nor is the competitive pressure limited


just to the emergence of nearby senior communities. “As more money gets put into condos in a market, as more condos are developed and built, that may raise a prospect’s expectations around the kinds of finishes they see,” Smith said. “People have choices when they decide whether to move into one of our communities, including the choice to stay where they live currently.” There’s a tricky balance involved here.


On the one hand there is surely a need to stay current with what others are doing. At the same time, senior living executives say they are eager to chart their own course, to build a business model around their own ideas of service and comfort. “We believe that if we are keeping up


with our own standards, we shouldn’t have to worry about the competition. If we are putting the residents first and have a high standard for them, we will already be at or better than new competitors,” Warren said. At the same time, he said, LaSalle leader-


ship keeps its eyes open when laying capex plans. “You’ve got to be aware of what your competition is doing, who is coming and going,” Warren said. “We are very aware of when new competitors come in and we do factor that into our budget and our planning.”


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