Seniors Housing Business is the magazine that helps you navigate the evolution of the seniors housing industry.
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www.seniorshousingbusiness.com 29 February/March 2017 n Seniors Housing Business 2011. Anthem currently has 10 facilities up and running, plus the two under construction in Illinois, and six other projects in the plan- ning stages. Anthem's projects are located in Kansas, Illinois, Colo- rado and California. The infill projects now under- way in the Chicago area are located in Glenview and Oak Lawn, established suburbs with little available land. As a result, both projects are two-story facili- ties, the first of their kind for Anthem. The company's other projects are one-story designs with either 54 or 66 units built around two large courtyards. "We are choosing to go into places where it is harder to develop," says Isaac Scott, prin- cipal of Anthem Memory Care based in Lake Oswego, Ore. He prefers areas with high barriers to entry where land is scarce and the municipalities have significant entitlement hurdles. The entire development process in such mar- kets can take 36 to 40 months ver- sus 18 months in locations with few constraints. Anthem uses a proprietary algo- rithm to pick new locations. The formula considers the incidence of memory loss for five different age cohorts, and how many resi- dents in a three- or five-mile area would need 24-hour care. Area incomes are then overlaid on those results, along with the current and expected supply of memory care units to determine whether the market can support a new project. For example, the company divides Los Angeles, one of its development targets, into 500 one- mile market rings. The algorithm is applied to the market rings to create a kind of heat map to show where a development should be located. Scott says a high-barrier-to-entry location will result in higher rents and a quicker lease-up. "It really solidifies operations of the build- ing for the long term," he says. "Markets where it's easy to build are too risky." Land prices in desirable loca- tions are rising, mostly due to competition from multifamily and homebuilders, say develop- ers. "There are no great deals out there," notes Anthem's Scott. Land prices have spiked 20 to 50 percent over the last few years in markets such as Orange County, Calif., Los Angeles County, the San Francisco area and Seattle. The cost of an acre of land in these markets is approaching $2 mil- lion, according to Paul Mullin, senior vice president of develop- ment at Silverado Senior Living. The Irvine, Calif.-based company owns and operates 36 freestanding memory care facilities. Three more are in the planning stages. Construction costs are rising. Over the last 12 months, material and labor costs have increased 6 to 12 percent, according to developers. Labor is scarce, too. One devel- opment team travels with its own subcontractors, bringing them to work on new job sites in different cities. That avoids the scramble for local workers. "It's a subcontrac- tor's market," says Barbee at the LaSalle Group. Freestanding versus combo Amid the wave of new develop- Banking products and services subject to bank and credit approval. BMO Harris Commercial Bank is a trade name used by BMO Harris Bank N.A. Member FDIC Discover a commercial banking partner with a deep understanding of the senior living market, the opportunities and challenges you face, as well as the value of a seamless deal. Whether you're looking to modernize, build or acquire, BMO Harris Commercial Bank is here to help make your big plans possible. Visit bmoharris.com/realestate to learn more. Turn possibilities into a plan. Helping senior living facility owners build for the future. Equine therapy will be offered at Hacienda at the River, a community under construction in Tucson that provides memory care and other services.