Seniors Housing Business

FEB-MAR 2018

Seniors Housing Business is the magazine that helps you navigate the evolution of the seniors housing industry.

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www.seniorshousingbusiness.com 27 February-March 2018 n Seniors Housing Business assisted living and memory care. Atria Senior Living will operate the building. "We liked this location because it's an affluent infill location with a dense population," says Burke. Whereas many suburban locations may have 10,000 potential senior residents within a five-mile radius, the Englewood site has about 30,000 seniors in the market area. The site is small, only three- quarters of an acre. It had been occupied by a medical office build- ing that was torn down. The site was expensive. (Burke declined to share the cost of the project, or of the land.) The entitlement pro- cess with the municipality took 18 months. By comparison, the enti- tlement process in a low-barrier- to-entry market takes about six to nine months, Burke estimates. With its vertical design, says Burke, CA's mid-rise project in Englewood will serve as a pro- totype for other infill projects in dense suburban locations. There's little margin for any kind of error in a high-barrier-to- entry market, sources say. This is especially true as labor and con- struction costs continue to rise. "You have to be more selective in a high-barrier-to-entry market," says Clint Malin, executive vice president and chief investment officer at LTC Properties (NYSE: LTC), a publicly traded healthcare real estate investment trust based in Westlake Village, Calif. LTC has two new projects in the Chicago area in suburban infill locations. A memory care project in Oak Lawn is slated to open this spring. Another memory care proj- ect in Glenview is already open. The developer and operator of both buildings in metro Chicago is Anthem Memory Care based in Lake Oswego, Ore. "Every market from a develop- ment standpoint is unique," says Malin. Big city wish list Developers are bullish on New York City. Kayne Ander- son and its partner, the Fresh- water Group, had been looking for years for a suitable location in the market. The Freshwater Group is the acquisition, finance, design and development arm of Watermark Retirement Com- munities, which will operate the building in Brooklyn Heights. Watermark and Freshwater are Manhattan high-rise tops barriers-to-entry list Among high-barrier-to-entry markets, Manhattan is a heavyweight champion. With a population density of 66,940 people per square mile, the development of a new high-rise requires plenty of patience. Inspir Carnegie Hill has a five-year time horizon from start to finish. The new $300 million senior living project is now under construction on Manhattan's Upper East Side. The process began in 2014. It took a year to assemble the land on Sec- ond Avenue, between 93rd and 94th streets. The design and construc- tion drawings were 18 months in the making. After a two-year con- struction process, the community is slated to open sometime in 2019. "Our first foray into urban development is one of the more challeng- ing you could encounter," says Greg Smith, CEO of Maplewood Senior Living based in Westport, Conn. "It's a long journey that takes incred- ible staying power and a lot of capital." Maplewood owns and operates 15 senior living properties. Its capital partner on the Inspir Carnegie Hill project is Omega Healthcare Inves- tors (NYSE: OHI), a publicly traded real estate investment trust. The 23-story luxury project will feature a total of 215 units and offer independent living, assisted living and memory care. Amenities will include gardens, an indoor heated pool, a state-of-the-art movie theater, library and a variety of high-end common areas and dining venues. When Maplewood broke ground on the project, it announced the creation of the Inspir brand. The company plans to develop other Inspir communities in high-barrier-to-entry urban markets. "We are looking at major gateway cites," says Smith. The Inspir brand name comes from the word "inspire," meant to provide an "inspired" lifestyle. For example, the activities at Inspir Carnegie Hill will focus on wellness. The biggest pre-construction obstacle at Inspir Carnegie Hill was managing the land purchase process. Five buildings owned by five dif- ferent entities occupied the land. A sixth entity secured the purchase contracts with the five property owners, and was also a party to the transaction. "We had to manage six counterparties," says Smith. "They were all different." The buildings were five-story walk-ups with first-floor retail space and apartments up above. Some of the apartments were rent con- trolled. "We were responsible for relocating tenants and finding them accommodations in other locations," says Smith. Other challenges include: • labor shortages because of the hot local construction market; • issues with the labor unions; • a nine-month permitting process; • a plan review by the New York City Transit Authority, which has veto power over decisions because subway lines run under the property; • the tricky construction of two basements required to stabilize the property and keep water out. "The process is not for the fainthearted," says Tom Gaston, partner and chief investment officer at Maplewood. Despite the barriers, Gaston believes the project will generate healthy returns. Apartment rents will start at $15,000 a month. Rent includes meals, activities, housekeeping, transportation, access to all of the amenities, and a basic level of personal care. Higher levels of care will be charged separately. The project will be marketed to all of Manhattan. Adult children who live and work in Manhattan have also shown an interest in relocating their parents nearby. Maplewood's Smith believes there will be plenty of consumer demand for the apartments. Even though a handful of new projects have been announced recently, no comparable senior living properties have been built in Manhattan in the last 20 years. "We understand the challenges of these urban markets," he says. "We've spent a lot of time vetting the process to make sure this is a viable project." — Jane Adler

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