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 29 February-March 2018 n Seniors Housing Business Infill projects can generate attractive returns, sources say. Merrill Gardens has a project in the Seattle suburb of Burien, located in a redeveloped town center. The project hit 94 percent occupancy in six months. Annual revenue totals about $2.2 million, generating a cash-on-cash return of 12.82 percent (see table). "Seniors prefer to be integrated into a community," says Pettit. The Ballard project, for example, is located in a trendy neighborhood with lots of restaurants, shops and young families. The easy thing to do is to find a site on the outskirts of town where you can build, notes Pettit. "But that's not always the right answer if you are looking to deliver an environment that seniors will value with the ability to walk out- side into a vibrant neighborhood." Macro trends are impacting site selection. Artis Senior Living found a retail center in Wilmette, Ill., a dense suburb of Chicago. The center was not fully occupied, but was not for sale. The tenants, however, were not shops but ser- vice providers, such as a nail salon and driving school. The retail center in Wilmette will be taken down, and Artis will begin a new three-story project on the site in late 2019. The facility will include 64 memory care units. "Retail in this country is going through a huge change," says Jay Hicks, senior vice president of Artis, headquartered in McLean, Va. "We are playing into that dynamic of senior living as a ser- vice provider." Artis owns and operates 10 properties and has another 25 projects in various stages of pre- development. The company was launched in 2012 by the Bainum family, which started the nursing home company that would even- tually become HCR Manor Care. The Bainum family does not own any interest in HCR Manor Care. Artis also has a project under construction in Chicago's Lakev- iew neighborhood on a one-acre infill site. The five-story project will include 140 units offering assisted living and memory care. It will open sometime in 2019. Hicks previously headed up the international real estate portfo- lio for the U.S. State Department, tasked with finding locations for embassies around the world. He found the site for the new U.S. embassy in London that opened in January as well as the spot for the American embassy in Bagdad. Asked to compare the site search for an embassy versus a senior living property, Hicks is quick to respond: "Good, close-in assisted living sites are harder to find." n Development Deal Dissected Merrill Gardens at Burien is located just outside downtown Seattle in the heart of Burien. The community, which opened in February 2017, offers independent living, assisted living and memory care. The project achieved 95 percent occupancy six months after opening. Above are the project costs and cash-on-cash return. Source: Merrill Gardens Land Soft Costs Hard Costs Total Cost Total Cost per Unit Hard Cost per Gross SF Equity Debt Yield-on-Cost Cash-on-Cash $1.16 million $8.55 million $31.57 million $41.28 million $327,000 $190 $14.5 million $26.84 million 8.21% 12.82% Merrill Gardens at Ballard, a 105-unit seniors housing community, opened just over one year ago in an urban infill neighborhood just north of downtown Seattle.

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