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AEGIS ASSISTED LIVING

Founded: 1997

Founders: Bill and Cindy Gallaher, Dwayne Clark

Headquarters: Santa Rosa and Redmond, Wash.

Facilities: 13 in operation, seven under construction, five planned,

in California, Washington and Nevada

Apartments: 916

Employees: 760

2001 revenues: $33 million projected

CENTERS NOT NEW TO SONOMA COUNTY

Largest assisted living facilities, Sonoma County (ranked by number

of apartments)

* Sunrise Assisted Living of Santa Rosa, 120 apartments, monthly base

rate* $2,099 to $2,418, owned by Sunrise Assisted Living, Fairfax,

Va.

* Brighton Gardens by Marriott, Santa Rosa, 117 apartments, monthly

base rate $2,750 to $4,600, owned by Marriott International,

Washington, D.C.

* Springfield Place, Petaluma, 92 apartments, monthly base rate

$2,360 to $3,800, owned by Leisure Care, Bellevue, Wash.

* Avalon at Brush Creek, Santa Rosa, 80 apartments, monthly base rate

$2,650 to $3,200, owned by Vintage Senior Housing Group, Costa Mesa.

* Sunrise Assisted Living of Petaluma, 76 apartments, monthly base

rate $3,264 to $4,575, owned by Sunrise Assisted Living, Fairfax, Va.

* Chancellor Place of Windsor, 73 apartments, monthly base rate

$2,595 to $3,395, owned by Chancellor Health Care, Santa Rosa.

* Adobe House, Petaluma, 40 apartments, $135 a day, owned by Adobe

House LLC, Petaluma.

* Primrose of Santa Rosa, Santa Rosa, 25 apartments, $142 to $232 a

day, owned by Primrose Special Alzheimer's Living Inc., Santa Rosa.

*Base rate typically covers room, meals, transportation,

housekeeping, laundry, activities, help with daily living tasks such

as bathing, grooming, taking medications. Additional charges depend

on level of assistance needed, except at Adobe House, whose only

additional charge is for incontinence, and Primrose, whose prices are

all-inclusive.

Sonoma County developers Bill and Cindy Gallaher, tired of the obstacles to

home building and attracted to opportunities in the growing seniors

population, have started a new company aimed at a sensitive market: building

and operating luxury apartments for the frail elderly who need some help with

daily tasks but no intense medical care.

After 20 years of building almost 1,000 houses in Sonoma County, including

650 for seniors in Oakmont and Windsor, and the Lakewood Village Shopping

Center in Windsor, the Gallahers founded Aegis Assisted Living in 1997.

``I liked the demographics, and I know there's a huge need for the services

and care,'' Bill Gallaher said. ``The expanding market of seniors is what drew

us there.''

In four years Aegis has developed 13 assisted living residences with 916

apartments in California, Washington and Nevada. Seven more are under

construction, and another five are in the planning stages.

None is in Sonoma County, but since 1995 the same enthusiasm for

demographics has prompted other companies to start eight large assisted living

facilities with 623 apartments in Sonoma County.

At Aegis, the Gallahers run the development, construction and accounting

from their headquarters at the Airport Business Center in Santa Rosa. They

have 60 employees.

Their partner, Dwayne J. Clark, a 17-year veteran of assisted living, runs

the residences from his headquarters in Redmond, Wash. He has 700 employees.

Before teaming up with the Gallahers, Clark was executive vice president of

Sunrise Assisted Living, the fourth-largest and one of the oldest assisted

living companies in the United States.

Aegis reported $19 million in revenues last year and projects $33 million

this year and $52 million in 2002 -- bucking a sharp slowdown in growth that

has plagued the industry nationwide since 1999.

In the mid-1990s, enthusiasm for assisted living ignited bold predictions

of profitability, attracted Wall Street investors and fueled a burst of

development nationwide.

The new housing for seniors seemed to fill an important niche between

independent living and a nursing home. It was welcomed by affluent grown

children who held jobs and had young children and couldn't care for their

parents at home but didn't want to put them in a nursing home.

But overbuilding in some areas in the late 1990s, bad management at

companies that grew too fast and allegations of poor care at some facilities

have driven down the stocks of many publicly traded assisted living companies,

dried up financing and spawned a host of bankruptcies.

``Deals got done by people who shouldn't have done them -- people who

focused on the development side but who didn't have experience in the

operations side,'' said Robert G. Kramer, executive director of the National

Investment Center, a Washington, D.C., association for seniors housing and

care industries.

``This is a care industry, it's not just real estate,'' Kramer said. ``You

have to know how to provide quality care and make your residents and families

happy.''

After adding new facilities at a rate of almost 25 percent a year in 1996

and 1997, the industry growth rate dropped to 7 percent in 1999 and 2000.

AEGIS ASSISTED LIVING

Founded: 1997

Founders: Bill and Cindy Gallaher, Dwayne Clark

Headquarters: Santa Rosa and Redmond, Wash.

Facilities: 13 in operation, seven under construction, five planned,

in California, Washington and Nevada

Apartments: 916

Employees: 760

2001 revenues: $33 million projected

CENTERS NOT NEW TO SONOMA COUNTY

Largest assisted living facilities, Sonoma County (ranked by number

of apartments)

* Sunrise Assisted Living of Santa Rosa, 120 apartments, monthly base

rate* $2,099 to $2,418, owned by Sunrise Assisted Living, Fairfax,

Va.

* Brighton Gardens by Marriott, Santa Rosa, 117 apartments, monthly

base rate $2,750 to $4,600, owned by Marriott International,

Washington, D.C.

* Springfield Place, Petaluma, 92 apartments, monthly base rate

$2,360 to $3,800, owned by Leisure Care, Bellevue, Wash.

* Avalon at Brush Creek, Santa Rosa, 80 apartments, monthly base rate

$2,650 to $3,200, owned by Vintage Senior Housing Group, Costa Mesa.

* Sunrise Assisted Living of Petaluma, 76 apartments, monthly base

rate $3,264 to $4,575, owned by Sunrise Assisted Living, Fairfax, Va.

* Chancellor Place of Windsor, 73 apartments, monthly base rate

$2,595 to $3,395, owned by Chancellor Health Care, Santa Rosa.

* Adobe House, Petaluma, 40 apartments, $135 a day, owned by Adobe

House LLC, Petaluma.

* Primrose of Santa Rosa, Santa Rosa, 25 apartments, $142 to $232 a

day, owned by Primrose Special Alzheimer's Living Inc., Santa Rosa.

*Base rate typically covers room, meals, transportation,

housekeeping, laundry, activities, help with daily living tasks such

as bathing, grooming, taking medications. Additional charges depend

on level of assistance needed, except at Adobe House, whose only

additional charge is for incontinence, and Primrose, whose prices are

all-inclusive.

``People have really backed off. The rate of development has slowed

considerably,'' Gallaher said.

But instead of seeing this as a problem, the Gallahers believe there's

still plenty of opportunity for companies that select their sites carefully,

offer service and elegance and run their businesses well.

Bill Gallaher's first brush with assisted living was in 1995 when Michel

Augsburger, founder of Chancellor Health Care in Santa Rosa, got him to build

Chancellor Place of Windsor, one of the county's first assisted living

residences.

Then he built nine more assisted living facilities for several companies,

including the Sunrise Assisted Living residence in Petaluma, before founding

Aegis.

Gallaher said Aegis has avoided Sonoma County, to give Chancellor Place a

chance to get established, but he's now considering it. He believes there's

still room in the county for another residence, but Augsburger isn't sure.

Augsburger said Chancellor Place generally is full and has a waiting list,

but he wonders how the opening this week of Avalon at Brush Creek, a Santa

Rosa assisted living facility with 80 apartments, will affect the market.

``There's no third-party or government support for the types of buildings

we're talking about ... for the most part it's purely a private pay business,

and there's clearly a finite number of seniors who can afford to pay the

costs,'' said Augsburger, who is chairman of the California Assisted Living

Facilities Association, a group of about 300 companies.

Augsburger's company operates seven assisted living residences in

California and one in Nebraska.

Sonoma County so far appears to have avoided the overbuilding and poor

management that has hurt the assisted living industry elsewhere.

But the county was touched lightly by the fallout when Alterra Healthcare

Corp. of Milwaukee, Wis., the nation's largest chain of assisted living

facilities with 453 residences, ran into financial difficulty and was unable

to open its new Santa Rosa residence, Avalon of Brush Creek.

As part of a debt restructuring plan, Alterra sold Avalon to a Costa Mesa

company Oct. 25, and new residents begin moving in Monday.

The Gallahers said one reason they shifted from building houses to

developing assisted living residences was for personal satisfaction.

``Home builders are demonized,'' said Cindy Gallaher. But assisted living

developers ``can almost be treated like a hero.''

``When you talk to family members who are sometimes desperate for care,

it's really rewarding to see that and be able to help people,'' Bill Gallaher

said.

The Aegis founders chose the Greek word ``aegis'' because it means to

shield or protect. Aegis has about 735 residents in its 13 facilities, two of

which have been open only a few weeks. Several homes are full with waiting

lists, and all that have been open at least 1 1/2 years are 95 percent full

or more, Gallaher said.

This compares to an average industry occupancy rate of 80 percent to 85

percent, according to industry reports.

The average age of an Aegis resident is 83, and the average stay is 30

months. The goal is for residents to live out their lives at the center.

But some have to move to nursing homes when they need care the center

cannot provide. Aegis has a nurse on site 40 hours a week, but it does not

offer the services of a skilled nursing care facility.

The monthly fees that residents of assisted living complexes pay can be

confusing. Aegis and many others charge a base rent for residents who don't

need much help, and they add charges as they have to provide more services.

``You couldn't charge everyone the same rate. It wouldn't be fair. The care

is so different,'' Bill Gallaher said. Rates also vary by location.

At Aegis, the lowest monthly base rent is $2,700, which includes three

meals a day, scheduled transportation, activities and help with some daily

routines like bathing and dressing. But residents pay extra for more

assistance, and costs can go up to about $5,500 a month for residents with

Alzheimer's and other dementia.

It's important for assisted living companies to make sure residents and

their families understand the complex cost structure and the fact that

residents may have to move to a nursing home if they begin to need care the

center can't provide, experts said.

``Have you clearly communicated to the residents and especially their

families that you're prepared to provide that care but it will cost them more?

Or if you aren't prepared to provide that care, do they understand that?''

Kramer said.

One of the biggest challenges facing the assisted living industry today is

getting good staff who will provide quality patient care -- and dealing with

the liability when they don't.

``Recruiting, training and retaining staff has been an Achilles' heel of

this industry,'' Kramer said.

Even Aegis -- which enjoys a good reputation in the industry overall,

according to state officials, county ombudsmen, competitors and Kramer -- has

notable issues at three of its 11 California facilities, according to the

state Department of Social Services, which licenses assisted living

residences.

In Moraga, Aegis is being sued for allegedly leaving an 85-year-old

Alzheimer's patient outside in the sun in June, causing a second-degree

sunburn, heat stroke and a heart attack.

In Aptos and Fremont, Aegis has had several problems ranging from

inadequate staff training and improper handling of medications to timely

resident care, according to the social services department. The department

said Aegis has cooperated with regulators to make improvements.

Gallaher said he believes Aegis does a very good job overall, but it has

made mistakes, will probably make mistakes in the future and must do better.

``We're entrusted. We need to care for people and watch out for them,''

Gallaher said flatly. ``Our job is to make sure this doesn't happen again.''

You can reach Staff Writer Mary Fricker at 521-5241 or

mfricker@pressdemocrat.com.

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