Continuing Care Retirement Community – Deep Dive Into Financial Statement of VMRC

Continuing Care Retirement Communities (CCRC) are non-profit. Many of them are affiliated with a church denomination of some sort.

In this episode we look at the Virginia Mennonite Retirement Community (VMRC) in Harrisonburg, VA.

Virginia Mennonite Retirement Community

Why VMRC? Because when I lived in the Shenandoah Valley, I had clients here. And would find myself at VMRC a few times a month, doing seminars, meeting clients, attending various events. It’s a good place run by good people.

However, it takes more than just “good people” for me to feel comfortable dropping hundreds of thousands of dollars, essentially all my life savings, at some place. So, I wanted to analyze the books they provide for the public to see.

A couple things jumped out at me that you should be aware of if you are considering your own CCRC for you or your folks.

Pay Your Own Utilities At The Independent Living Cottages

1. at VMRC at least, the independent living cottages do NOT have utilities provided for in their monthly fee. The apartments do. But not the homes. I do not know if that is typical. But it is important to understand because the monthly fees will be much lower for the cottages most likely simply because you’re paying those expenses on your own. If you’re going to have a hard time meeting the expense of the cottage it’s only going to get that much worse when you go to the apartments.

Monthly Fees Go Up Each Year – Depends on Amenities

2. The monthly fees go up each year and the amount is not insignificant.

For the cottage living space the monthly fees increase on average $25 a month each year.

For 1 apartment that has a lower monthly meal plan cost, the monthly fees go up on average $45 a month each year.

For the other apartment, with a higher meal plan allowance, the monthly fees go up $65 a month each year.

So, you’ve got to weigh those increases with your own budgeting.

Refunds on Entrance Fees

3. Be wary of the “refunds”.

Now, in no way am I saying the refunds these folks offer are unscrupulous or anything. What I am saying is that interest is NOT earned on your refunded amount.

So, a refund of $250,000 or so today won’t be nearly the same value in 15 years. Just remember that.

What VMRC does, as do most CCRC’s I imagine, is offer a normal fee based on the fair market value of the unit today. Say that unit is assessed at $300k. That’s your entrance fee.

With this you will get a refund of 60% after you’ve been there for 5 years. (I do not know if this goes to your heirs and/or estate. So, you’d need to check that).

Discount On Entrance Fee, Pay Premium For Higher Refund or Pay Fair Market For 60% Refund?

However, you could “buy” a higher refund option where you pay 150% of the FMV of the unit, or in this case, $450,000. Then you would get a refund of 90% after 5 years.

Lastly, you can pay only 75% of the FMV and get NO REFUND after 5 years. So it would cost you $225,000 today for an entrance fee but when 60 months is up, they owe you nothing.

I’ll do another video on whether or not it makes financial sense to take the refund option.

No Escrow Account For Refund Obligations

Now, VMRC states, very explicitly, that there is no escrow account for your refundable assets. If you get a refund it comes out of operating expenses or from selling a unit to a new entrant.

That concerns me to some degree. But looking at their books they have MORE than enough in marketable securities to cover ALL the refundable liabilities they have.

Thus, I am not concerned much at all.

Marketable Securities Much Larger Than Refund Obligations

However, I would check their Statement of Additional Information EACH YEAR to ensure that their marketable security balances are keeping up with the refund obligations.

If not, and you need a refund, from where does it come???

Anyway, all in all, this was a very informative exercise for me. I hope you find it helpful.



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