By Jack Cumming
I’ve loved cruising, and my wife indulged me. She liked being on board. She didn’t like getting to the ship and all the ICE machinations it entailed. Yes, ICE, Immigration and Customs Enforcement, are those folks with the dogs who screen you as your voyage ends.
The Vicarious Lifestyle
But back to our story. Since we liked all-inclusive cruising, it’s not surprising that the thought of living in a CCRC appealed to us. It’s also not surprising that the dream of endless cruising caught our fancy.
Periodically, I’ve written on Senior Living Foresight of the Villa Vie Odyssey, though we’ve stayed ashore. [Article 1, Article 2, Article 3, Article 4]. Villa Vie Odyssey has been a residential cruise ship. Residents paid a “buy-in” of hundreds of thousands of dollars and a recurring fee to enjoy a carefree existence sailing the world. Their vessel was an old cruise ship, aging like its residents. The crew got to know and love their residents. Sounds idyllic, doesn’t it?
My wife and I have been vicarious adventurers, following Villa Vie on YouTube as well as the lives of the residential mariners as they decorated their cabin homes, became a close-knit, welcoming community, and sailed from experience to experience. What can be more life-enriching than multiple days in one port after another and evenings with friends who become all that and more? It’s like the dream of CCRC living on steroids.
The other day, it all came abruptly to an end. All that’s clear is that the managing owners, Villa Vie Residences, said they could no longer support the venture. They disembarked the residents so they could shut the ship down to a minimum. One example CCRC operators will appreciate is the savings from shutting down the chillers in a warm climate. As you might expect, that mandatory disembarkation with little notice came as a shock to the residents.
Collective Operation vs. Individual Equity and Security
The significance for senior living of this sad ending of a dream life is that the finances behind it were very similar to those of many not-for-profit CCRCs. The demarcation is between principled financial management and mere compliance.
Principle might hold that individual equity for contracting residents is sacred since many residents trust that promised care will be there for them, individually, if they ever reach the point at which care is needed. An operating standard, though, might just look at the collective.
Principles, Perspectives, and Moral Justice
Principles can vary by an individual’s perspective. An outside adviser, paid by corporate, might look at the collective and conclude that that’s what matters. It’s different for residents. A resident depends on those promises and may have invested more than they should have in consideration for a contract containing those promises. A prepackaged bankruptcy can void that contract and those promises in an instant.
There’s a difference between a collective enterprise that can turn out well for some, while others have unrecoverable losses. The magnitude of the financial commitment and the vulnerability of older residents, whether in a CCRC or on a residential cruise ship, makes individual equity more important. That’s very different from the collapse of, say, a video streaming service going bust, leaving subscribers out of pocket for the balance of their subscription. Residents have much more at risk.
Lifetime Promise vs. Till the Cash Runs Out
There are parallels between the end of a life-of-the-ship promise and the end of an as-long-as-you-live promise in a CCRC. The residents have much more at stake than the operators and their advisers, who can move on to their next assignment. Some residents have most of their wealth invested in that residence, while others just write it off as an investment gone bad.
One belief, often incorporated into codes, reflects an operator’s perspective. To paraphrase: A CCRC can operate indefinitely and deliver promised services to contract holders in an inflationary environment as long as it can keep selling entry fee contracts, maintain occupancy, and raise monthly fees to match internal inflation, regardless of whether it is fully funded. In other words, a CCRC can keep going until the cash runs out or the market balks, regardless of individual resident expectations.
The other belief is less popular: A CCRC should be priced, funded, and operated to ensure that the current value of future promises made to individual residents can be fulfilled, regardless of whether the enterprise continues. It’s also principle to assert that money paid to secure care for residents if they become frail, gullible, and vulnerable should never be diverted to serve as at-risk equity capital to secure banks and other creditors from loss.
A Clash of Two Principles
That’s a clash of two principles. It now appears, though the finances are not transparent, that the Villa Vie Odyssey was run on the first principle, as many CCRCs are. Incorporating that principle into standards, codes, or law gives it authority. Authority, however, doesn’t always result in just outcomes. In fact, authority often deviates from justice.
This disconnect is a particular challenge for not-for-profit CCRCs, or quasi-cooperative ventures like the Villa Vie Odyssey, which lack access to equity capital markets or choose to limit equity investors. The solution might be covenantal mutual benefit corporations. That solution is a topic for another article at a later time.
In the meantime, the collapse of the Villa Vie Odyssey and the distress of the residents will soon be forgotten. Few today remember the collapse of Pacific Homes. The same is true of Air Force Village West and many others. Marketing favors happy talk, not the realism of balance sheets, legalisms, and financial probes. AI searches tend more toward marketing than caution.
That swift, sharp shock, soon to be forgotten, brings to mind T. S. Eliot’s wisdom:
This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a whimper.
The Villa Vie Odyssey and its happy residents happened to be in Cambodia when they heard that “whimper.” It was announced by the hotel director.
