• Accurate Market Boundary Determination (linked to data on the ground)
• Net Demand Model (replaces the Traditional method Penetration Rate model)
• Appropriate experience in analysis.

  Accurate Market Boundary Determination (patent pending) is key to any analysis; it defines what is counted from what is ignored. Viewed as a part of a Point Analysis, the procedure follows this general sequence..

• The area under consideration is laid down in a Geographic Information System, including:
  • Street Network
  • Boundaries
    • State,
    • County,
    • Census Tract,
    • Block Group
  • Places
  • Major Roads
  • Other physical features, as needed.
  • Demographic themes are added including:
    • Elders over 75 with incomes over a specified value.
    • Median housing values
    • Children of Elders
    • Mobility and Self-care limited people
• Travel times are computed by converting the street network to a network and solving it for equal travel time, to develop multiple travel time traces surrounding the location under consideration. These travel time traces (which are later converted to bands) are 100% replicable and (see below) are linked to data on the ground.
• Data relating to travel time and demographics are drawn from existing facilities in the general area.
• The data in the step above are used to make quantitative statistical links between the travel times and the expected behavior (for example, proportions of enrollment) of the population surrounding the location under consideration.
• Various (replciable) analyses and correlations are conducted to determine relation between the travel time bands and the expected behavior of the population.
• The bands are then weighted by the expected proportions of enrollment associated with each band.
• Demand, from a quantitative demand model and the data drawn in previous steps, is then computed for each band.
• Note out of context: although we have significant talent focused on this problem (see "who we are"), demand models are notoriously difficult to construct and to validate.
  • Our techniques are a vast improvement over the Tradtional method penetration rate model and the often arbitrary selection of coefficients for that model.
  • However, we use, for example in Comparison analyses, a novel procedure to reduce variability.
    The approach is use the ability to create reproducibly equal market areas to enable "triangulation" against a known and stabilized facility.
  • Thus, reproducible market areas are used to increase the stability of the demand model.
  • The existence of a reliable way to draw reproducibly equal market areas opens the door to valid comparison, which, in turn is the key to vastly increased predictive accuracy and the Comparison, Area, and Multi-Unit Simulation analyses.
• Then, we plot the Supply of competing beds and the values for demand, in beds. These variables are located down to the block group level in the GIS system.
• Then, we subtract Supply from Demand and obtain a value for Net Demand in beds for each block group.
• The values are then weighted by the band weightings obtained above. For example, in an external band weighted 5%, the resulting Supply and Demand figures are weighted by a factor of 5%. Continuing the example, short travel time band Supply and Demand will be much more heavily weighted.
• All are then summed to determine Net Demand at price and amenity point for the location under consideration.
• The ability to create equal markets is crucial to the Comparison, Area, and Multi-Unit Simulations.

  Net Demand Model:

    Traditional method analyses depend on the Penetration Rate model. The model has certain characteristics:

• It starts with a non-replicable market boundary, justified verbally as following, for example, "physical," or "psychological," or "religious," or "ethnic" boundaries. The explanation, when read closely, is insufficient to allow a third party to reproduce the process and draw exactly the same line.
• A non-replicable demand model (for example: "75% of the people over 85 who have incomes over $35,000 per year." ). While such a model can be stated and reproduced, its derivation cannot be stated and reproduced because it is usually arbitrary (though justified by some reference to "research").
• Non-replicable coefficients (for example, "the penetration rate will be 5%"). See comment above.
• It states, generally, that within the market boundary exists a market which will be penetrated at a rate equal to the coefficient chosen. Since the boundary on which it rests is non-replicable, and the subsequent steps tend to be arbitrary, the whole process is non-replicable and not very closely related to data on the ground.
• Problems with the Penetration Rate model are described at the end of the introductory Overview Slide Show and in the slide show covering Review of the Traditional method.

  HighValue Techniques allow a far more precise estimation of project variables, which, in turn, enable new types of studies (Comparison, Area, and Multi-Unit Simulations) which can be worth, to the client, many multiples of the price of the study.

Accurate Market Boundary Determination (above) is key to any analysis; it defines what is counted from what is ignored. Next it is necessary to make sense of the data.

  The Net Demand Model uses six variables, all easily recognized from Economics 101.

• Supply, the number of competing beds at price and amenity point.
• Demand, the number of beds of demand at price and amenity point. The demand is inferred from the demographic data from within the market area and interpreted through a quantitative demand model which is developed using data from facilities within the market area and from facilities in areas with similar demographic profiles.
• Net Demand in beds at price and amenity point.
• Breakeven, the daily rate at 93% occupancy where the facility covers its costs including debt service.
• Maximum Initial Daily Rate (MIDR) is the highest daily rate at which net demand equals the number of beds to be constructed, or an arbitrary number like 80 or 100 established prior to the start of analysis.
• Price Elasticity of Demand: the expected response of demand to increases above or decreases below the MIDR. Since we are interested in practical effects, we do not use the marginal rate convention at MIDR, we use the expected change in demand over the desired range. Example: changing price by $1.00 is a theoretical question; changing it by $5.00 is a practical question. We use the actual supply and demand curves to determine the best estimate answer to the second question.
  
  

   Appropriate Analysis:    Few analysts have a license to operate a senior living facility, nor is it likely they have demonstrated an ability to operate such a facility at a profit, or staff one, or lease one up from scratch. Even if a few exist, they are unlikely to have a thirty-year, successful career.

Qualifications to do analysis need to be relevant or "appropriate." There are two key areas:

• Analytic experience and familiarity with the tools of quantitative analysis is important; this keeps the analysis from being invalid (see the Review of the Traditional method).
• Operational experience that informs the quantitative results with the voice of experience and a deep knowledge of senior living development. We believe Bruce Boyer is extraordinarily well qualified to fill this role.

There is much talk of "experience," but few analysts have appropriate experience that is relevant to the task. We believe that the combination of the two sets of credentials is far superior to the pattern of the past, a Traditional analyst providing all knowledge about facilitiy operations and financial feasibility.