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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28 www.seniorshousingbusiness.com Seniors Housing Business n February-March 2018 Accelerating success. Colliers International knows how to guide you through the intricacies of a seniors housing transaction. colliers.com/seniorshousing Phone +1 800 858 5904 Email: NSHG@colliers.com based in Tucson, Ariz. New York City is attractive because it has had little develop- ment of new seniors housing, says Newland at Kayne Anderson. And it has lots of seniors. By 2040, New York City's popu- lation of residents age 60 and older is projected to reach 1.86 million, a 48.5 percent increase from 2000. This group will comprise 20.6 per- cent of the city's total population, compared with 15.6 percent in 2000, according to the New York City Department for the Aging. Other developers have recently announced new projects in New York City. Harrison Street Real Estate Capital partnered with The Northwind Group and The Engel Burman Group to purchase a 16-story art deco building on Man- hattan's West Side with plans to upgrade the building into luxury senior housing. Welltower (NYSE: HCN), a publicly traded real estate invest- ment trust, has a project under construction in Midtown Man- hattan. Maplewood Senior Living and its partner Omega Healthcare Investors (NYSE: OHI), a publicly traded REIT, have a project on the Upper East Side (see sidebar). The Kayne Anderson project in Brooklyn Heights was originally built as a hotel. The Jehovah's Witnesses church group, which most recently owned the building, was using it as a dorm to house volunteers. The building didn't have to be rezoned for senior living — a huge advantage. Assisted living was permitted under the existing zon- ing provision. "We don't like to take entitlement risk," says New- land at Kayne Anderson, pointing out that the municipal approval process can easily scuttle a deal. One reason Kayne Anderson won the deal over the multifam- ily developers also bidding on the project was that assisted living requires little parking. This can work to the advantage of seniors housing developers competing for prime infill locations, sources say. Renovations on the Brooklyn project will start this spring. The community will be named the Watermark at Brooklyn Heights and is expected to open in Novem- ber 2019. Upon completion, the project will include about 275 units. Two floors will offer mem- ory care units. The remainder will be a mix of independent and assisted living apartments. The project's big differentiator from its competitors, according to Newland, is the 70,000 square feet of common area space. It will feature a high-end wellness cen- ter, swimming pool, activity rooms and multiple dining venues. The 10,000-square-foot rooftop terrace has unobstructed views of lower Manhattan. The renovations will cost about $1.1 million per unit. Rents will start at about $8,000 to $9,000 a month for a studio apartment, with additional care charges as needed. Larger apartments will rent for about $15,000 a month, plus care charges. Those prices are in line with other seniors housing projects in New York City, says Newland, who is confident that the project will produce healthy investment returns. Newland adds that his company is seeking other high-barrier-to- entry locations in New York City and the San Francisco Bay area. Infill sites, outsized returns Finding a good site in dense markets is tough. "It's hard to assemble sites,'' says Bill Pettit, vice chairman of Merrill Gardens. The Seattle-based company owns and operates 30 properties. It has another 10 proj- ects under development. It took several years to assem- ble the two sites needed for Mer- rill Gardens at Ballard, a 105-unit senior living building that opened a year ago in an urban infill neigh- borhood just north of downtown Seattle. "Once you target sites, the word gets out quickly," says Pet- tit. "Everybody feels they have the key site for assemblage." The assembled land for the Bal- lard project was only a half-acre in size, presenting design chal- lenges. Much of the outdoor space, for example, consists of a rooftop garden. Infill construction is more com- plex. City streets and sidewalks must remain passable. Municipali- ties may require a fee for a license to accommodate construction on a city street. Construction costs are higher for infill locations by about 10 percent, says Pettit. But the trouble is worth it. The Ballard project leased up in less than a year, compared with a typical 18- to 24-month lease-up for most senior living projects. Atria Englewood is a seven-story, 130-unit senior living community in Englewood, Colo., a southern suburb of Denver.

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