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  • Jeffrey Anderzhon, FAIA

Master Planning

Master planning is more than a roll of drawings



Creating a workable master plan

There are many contributing factors which are necessary for a senior living master plan to be successful and workable. These diverse factors require an integrative melding of market, financial and built environmental feasibility in order to provide a full and complete picture of opportunity and obstacle in moving forward. Too many master plans are initiated by engaging one or two of these studies without consideration of the third. While this will provide a partial insight, it ignores the complete picture and thus challenges which might have been addressed earlier in the process will crop up at inopportune times and with less ability to effectively modify the plan.


Marketing Feasibility

One of the first steps necessary for a workable master plan is the market feasibility of modifying the existing campus product offering. The questions to answer are what will the primary market area (PMA) support and at what price point. In addition, competitors who are also targeting the consumers within that PMA must be identified and analyzed in terms of their strength and any portions of the target market that they may capture and maintain.


Care should be taken by the marketing consultant in order to not simply identify the PMA by zip code. This can be misleading as there are other criteria which affect consumer attitudes toward the offered product. These may include natural or man-made physical and geographical barriers such as intervening interstate highways or dividing rivers. There can also be physiological or “imagined” barriers such as the perception of “that campus is on the expensive side of town” and provider reputation becomes another factor that might either encourage or discourage acceptance of a new campus product.


Obviously, demographic data is the starting point. Determining the number of individuals in the PMA who are age qualified when the project is anticipated to be complete offers a snapshot of the focused target market. But it is important to look at those demographic trends and not simply rely on intuition. While we all know there is an impending crush of population as the baby boomer generation ages, it is also important to note that these individuals probably won’t be considering congregate senior living for at least another five years.


Economic qualifications are also critical to the market feasibility. Gathering and analyzing data of age-qualified individuals is the first step, but knowing what sector of that cohort are generally financially able to afford an anticipated new senior living product provides a more focused picture of potential residents. In addition, understanding both individual income and individual assets, such as home value is important to the equation.


If the anticipated product happens to be a new or reconfigured health care component such as skilled nursing, assisted living or memory support assisted living, an indication within the market feasibility study should be the need for such care services as well as the current and anticipated market penetration. Here is where the campus reputation becomes a more critical factor. A care provider cannot turn a bad reputation around simply by building a new facility.


Having examined all these parts and pieces of a market feasibility study, one final confirmation step is conducting focus groups of potential or at least qualified individuals. These focus groups often reveal challenges which were not previously considered or unacceptable price points which were thought to be acceptable.


This compilation of data and analysis by an experienced consultant can provide a profile of the market, the depth of the market and the competitive market place. These become the foundation of a logical master plan which can transform a campus physically, financially and competitively.


The Built Environment

Even before the marketing feasibility study is complete, the collaborative effort of considering built environmental options for the repositioning of the campus or adding services to the campus can begin. The first thing to address is the establishment of goals and expectations not only for the outcomes of the engagement but for the process utilized to achieve those outcomes. These are derived based on the client’s perceived needs and client culture along with any specific environmental and functional deficiencies which have been identified. Goals and expectations become touchstones throughout the process and need to be revisited each time the team meets in order to assure that the team is progressing toward those goals and remains grounded. Of course, this does not mean that the team cannot address goals which may be initially deemed as unattainable or simply “blue sky.” Exploring any and all options and ideas is really the purpose of master planning.


The engagement goals should be attainable and focused on a strategic plan developed by the provider organization. They can be divided into short and long-term categories with appropriately assigned time frames, and certainly not limited to the built environment, but need to include financial and scheduling/phasing goals. As the plan progresses, it is critical to consider how staffing changes will be met, how resident relocation, if any, will be accomplished and how any campus disruption will be positively portrayed. It is also important to revisit these goals each time the team meets in order to remain focused on them.


One of the first things the designer team members address is the functional program for the campus. This is a dynamic exercise completed by the provider for each area of service, amenity or support that they may or want to provide for their residents. While the team may assist in the completion of these forms, it is important that the provider address these key questions in order to fully inform design adjacencies, and the day-to-day functioning of each department or area of service. As a side benefit, this exercise often results in comments from providers that they gain insight to their campus they may not have previously had, or a renewed focus on specific areas of care provision.


If the analysis is aimed at a repositioning of a campus, it would be appropriate to prepare an analysis of existing space allocation and assessment of the built environment’s remaining life, particularly mechanical and structural systems and how the existing design may, or may not, function within the parameters of a new approach to care or a new care or housing product. Utilization of this information to benchmark against space allocations compiled on a national basis from previously completed projects informs the master plan as to where there may be imbalance between uses such as support space versus social space. The financial consultant also uses this information to ascertain ongoing operational and maintenance costs which can be compared to those of new structures.


By maintaining this detailed data resource of project space allocation from across the country, expeditious decisions can be reached as to where changes or additions should be made within the existing campus in order to meld the built environment with the anticipated care program or housing need indicated in the market study.


Once the existing space allocation determination is complete, creating an overall space allocation program fully meeting the needs of the intended or modified care program is undertaken without initial regard as to which spaces might be within existing or new construction. Examining those areas of existing construction which are deemed available and suitable for repurposing can be included in this space allocation program. This exercise provides and informs any concepts for the built environment and is indicative as to where the need for additional spaces might be or where existing spaces may be repurposed.


Working directly with the market analysis as well as the functional and space allocation programs (which are dynamic tools subject to change over the course of the engagement), discussions can begin about opportunities that may present themselves to the provider and how these might be addressed. Of highest importance are areas which might enhance the direct revenue for the campus such as additional care programs or housing products or perhaps conversions of care programs to a wider variety of care.


Financial Feasibility

Of course at this point the financial consultant is fully engaged and working in conjunction with the collaborative team. As the modifications to the built environment are developed, exploration of these modifications on revenue production based on an increase or decrease in payer source or the introduction of new products can take place. Additionally, the revenue stream can be laid out based on the phasing of any environmental modifications and the displacement or moving of any existing residents.


Critically important also is the balance of revenue producing portions of the built environment with non-revenue producing portions. Additional, but state-of-the art non-revenue areas may enhance marketing efforts or, at minimum, resident satisfaction, comfort and independence, but will not directly enhance revenue. However, care needs to be taken that these spaces are not out of balance with competition nor out of balance with costs associated to provide them versus overall revenue. An events center, for example, can capture additional market by providing a venue for enhanced resident entertainment as well as engagement of the community outside of the campus providing an excellent marketing opportunity.


Investigating financial feasibility involves inputting of both hard (construction) costs which may be undertaken and soft costs. An accurate estimation of the construction costs is critical to the accuracy of the financial projections. Thus, another member of the collaborative team might be a construction manager or a professional construction cost estimator not only for costing but also for scheduling expertise. Additionally, having a full understanding of how construction pricing is trending and how local construction markets are being affected by that trending is critical to financial projections. Inclusion of contingency amounts both for unforeseen variances in construction pricing and for Owner generated modifications as the project moves forward are important elements in assuring the financial feasibility is conservative.


Soft costs are too often underestimated or overlooked. These include such things as professional service fees, insurance costs, seed capital and marketing expenses. In addition, capitalized interest expenses are calculated under this area of financial feasibility. These costs can be quite significant and need to be carefully analyzed for project success.


The financial consultant must also provide calculations for the sources and uses of funds and provide clear indications of operational costs and any fill-up or vacancy overlays and their inflationary increases over time. To satisfy potential lenders, calculations of debt coverage ratios, projected days cash on hand and the ratio of cash to debt need to be completed, not only during the construction and start-up period of the project, but also at projected stabilization.


All of this work integrates into a well-reasoned master plan and contributes to a clear understanding of how a repositioning or right-sizing of a campus might alter not only the campus aesthetic, but enhance the market position and, over time, the financial position of the campus. If properly completed, this analytical master planning approach can be an inexpensive exploration of possibilities, opportunities and resident enhancements and provide a tool by which an organization can make fully informed decisions regarding the future of a campus.

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