Assisted-living companies slammed by stock market

October's fearsome stock-market plunge looks paltry compared to the free fall of companies in the assisted-living business — including Seattle-based Emeritus, one of the biggest.

The S&P 500 was down 17 percent for the month, but Emeritus dropped 54 percent, and rivals Sunrise Senior Living and Brookdale Senior Living fell 78 and 61 percent.

That's because investors see the companies occupying a convergence zone where all the economy's troubles intersect. The slump in housing values means potential elderly residents often can't sell a major asset for what they think it's worth. The stock-market decline is hurting customers' retirement portfolios. And the credit crunch raises concern about companies that borrow heavily to build complexes.

But not everyone is pessimistic. "We think those fears are overdone," says Jerry Doctrow, who tracks the industry for brokerage Stifel, Nicolaus & Co. in Baltimore. "The expectations in the market are that occupancies are going to drop through the floor, and we just don't see that."

Seattle is something of a hub for the industry as it is headquarters to three of the 10 largest operators, ranked by Assisted Living Executive magazine in April. Publicly traded Emeritus ranked second, with room for about 28,000 residents in 249 properties; there's also privately held Merrill Gardens (room for 6,770) and Leisure Care (4,987 in April, more than 6,000 now).

Leisure Care CEO Dan Madsen says declining home values have "definitely affected us. ... The comment I get is, 'We need to sell our house to make this move, and I don't know where the bottom is.' "

Still, after a "fairly bleak" start in six projects that opened this year, "we've had a real uptick the last three months in all of our new buildings," he says.

That may be because assisted living is "a very need-driven service," says Pamala Temple, president of Seattle-based A Place for Mom, which advises seniors on housing options and earns referral fees from more than 14,000 participating properties nationwide.

She says most people moving into assisted living are in their 80s and should be invested in bonds rather than more-volatile stocks, so perhaps they haven't been hit as hard by the market turmoil.

Assisted-living companies have responded to the shaky economy with "a little more discounting," Temple says. Typically they raise their prices 3 to 5 percent a year, she says, but now "it might be difficult."

Another response: Madsen says he's sending out letters to thousands of their residents, assuring them that "we are financially stable. ... They need that right now."

AvalonBay still a Bellevue believer

Whatever possessed AvalonBay Communities to break ground on a high-rise apartment project in downtown Bellevue during the worst investment climate since the Great Depression?

An AvalonBay executive answered that question before anyone could ask it at a Bellevue Downtown Association meeting this past week.

"It's a bet for us," acknowledged Brian Fritz, AvalonBay's vice president for development locally. "You've got to have a long-term outlook, especially in down times. We'll be here when everything comes back."

AvalonBay owns more than 150 apartment complexes in the Northeast, Chicago and the West Coast. That includes 11 local properties, two of them in downtown Bellevue.

This fall the company began building a third complex, by far the most ambitious: Avalon Towers Bellevue, a block north of Bellevue Square. Its two towers — the tallest will have 24 stories and 396 units and 16,000 square feet of ground-floor retail. Fritz valued the development at $130 million.

Few other big projects have broken ground in downtown Bellevue or downtown Seattle this year. AvalonBay leaped while others looked.

Fritz said downtown Bellevue's fundamentals — especially the slew of new jobs scheduled to arrive in the next year or two as companies like Microsoft and Expedia move in — were too good to pass up.

"We've got two years of construction," Fritz said. "We're going to ride this out."

— Eric Pryne

Alternative energy looks for the green

October brought Seattle more than pumpkins and fallen leaves — it brought two large-scale alternative-energy conferences.

Both events were packed. But three years after Al Gore and high energy prices helped kick off a wave of go-go green entrepreneurship, the mood was a mix of optimism and caution.

"We need to have a lot of creativity in funding," Josh Green, a partner with Mohr Davidow Ventures, said at the Algae Biomass Summit.

Money for new ventures is tightening up as the alternative-energy sector suffers from the double-whammy of falling oil prices and the financial turmoil.

Yet big money is going to be needed if the budding renewables industry is to ever take on Big Oil, participants were told at the second gathering, the Renewable Energy Financing Forum West.

"I think you're in the billions and billions of dollars to show truly ultimate scale," said Bob Nelsen, managing director of ARCH Venture Partners in Seattle. Nelsen helped launch Sapphire Energy, a company that in September raised $100 million to pursue an algae-based crude-oil substitute.

Silicon Valley legend Vinod Khosla said the money will materialize, however, as soon as green entrepreneurs show it's possible to make a profit without relying on subsidies. It could even come from the cash-rich oil industry, he told reporters on the sidelines of the algae summit.

"If you show them a better way to make money where you don't rely on (Venezuelan president) Hugo Chávez, don't you think they'd do it?"

— Ángel González

Comments? Send them to Rami Grunbaum: rgrunbaum@-

seattletimes.com or 206-464-8541