Seniors Housing Business

MAY-JUN 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 37 May-June 2018 n Seniors Housing Business "We're as cognizant as anyone of the dangers and concerns of over- building," says Milhaupt. "That's why we focus on Northern Cali- fornia, Seattle, Orange County and Los Angeles. It's just simply too expensive for overbuilding to eas- ily occur." "Developing in the California and Seattle markets takes a long time, a lot of money and a lot of horsepower to get through the entitlement process," explains Mil- haupt. "That keeps some competi- tion away." The company isn't looking to stray too far into healthcare just yet, preferring instead to focus more on the standard multifamily aspects of seniors housing. "Our current communities are focused on a healthy, active life- style with exceptional food and beverage and robust wellness offerings," says Wolff. "They are low-acuity communities that feel like a very comfortable country club." Standard offerings include flex- ible meal programs, transportation seven days a week, and a wide range of activities. The company is targeting younger seniors than in standard seniors housing, with a current average resident age of 77, compared to a national average of 84, according to ASHA. Because the residents skew younger, The Wolff Company is also building more two-bedroom units (between 30 percent and 40 percent of the total units) to appeal to more couples. "We're attracting more couples than we expected," says Milhaupt. However, Milhaupt hinted at future plans that could include more assisted living-style offer- ings. The buildings are specifi- cally designed so that up to 20 percent of the units could be con- verted from independent living to assisted living. The company accounted for future changes such as adding handrails and using backup generators. "Our thought is this: As folks age in place, if they want to stay there, that's an option," says Mil- haupt. "We don't underwrite our developments that way in decid- ing whether to go forward with a project, but it is an option at a later date." Units are not designed to flex back and forth, though, adds Mil- haupt. Once a unit is converted to assisted living, it is meant to stay that way. Changing the approach One feature that drew The Wolff Company to the seniors housing niche was the overall penetration rates. Although much improved in recent years, the penetration rate for independent living among households headed by a person over age 75 is still only 6.1 percent, according to recent NIC data. Today's low penetration rate presents an opportunity. There is a vast well of seniors who may eventually embrace the inde- pendent living concept, but who haven't taken the plunge just yet. The Wolff Company believes it can capture some of those residents. But that doesn't mean it's a fore- gone conclusion. The company's goal is to build a great product and always be willing to adapt to meet residents' needs and desires. "We're taking the long-term view. It's not get in, get out," says Milhaupt. "Let's build a brand; let's perfect it. We understand the lease cycle. There will be changes, and we're willing to be in it long term." The company understands its place as the proverbial "new kid on the block," says Milhaupt. Despite the aggressive development pipe- line, The Wolff Company has no intention of becoming massive. "I don't think we'll ever be on the national scale of Holiday Retirement. That's not our goal," says Milhaupt. "But if I didn't believe we were in for the long haul, I wouldn't have joined." What's more, Tim Wolff believes his company has something to offer seniors housing. As an out- sider looking in, he sees issues with seniors housing right down to the language used. In fact, he would've preferred not to use terms such as independent living, assisted living or memory care at all. "One of our frustrations with the existing business is its vernacular," says Wolff. "All of the above labels are based on how sick someone is, not how healthy they are. We think that is the wrong way to begin the conversation about helping people live happy and healthy lives." "The industry has been gener- ally slow to adjust to the desires of the residents of today and the future," continues Wolff. "A move- ment has begun with great work being done by groups like ASHA, but it will take a great deal of effort to truly shift the industry to properly serve its future residents. Our hope is that new product and an enhanced dialogue will help evolve the industry to serve the resident of the future." Building the capital Although The Wolff Company markets itself outwardly as a developer, the company is, in fact, a private equity firm that plows its investors' capital into new developments. "At its core, The Wolff Company is a real estate firm that delivers products and services to our resi- dents," says Wolff. "We are very fortunate to have a close-knit group of committed investment partners, which include family offices, endowments, pensions and other institutions." The company's first fund — Wolff Real Estate Partners I — was launched in 2010, supported mostly by high-net-worth indi- viduals in Silicon Valley. Once the company proved it could provide healthy returns, more institutional investors joined the fray, includ- ing major colleges and investment funds. Minimum investments are "very high," according to Milhaupt. For the company's last fund, the mini- mum investment was more than $10 million. Although it operates as a private equity firm, The Wolff Company has no current plans to sell off its seniors housing developments and plans to hold them long-term. The Wolff Company brands all of its communities, usually under the "Revel" name. The company's multifamily operations branch operates its age-restricted portfo- lio, but Clearwater Living is used as a third-party manager for all independent living buildings. "We liked the people at Clearwa- ter, and liked the fact that it wasn't a huge group that we were a small piece of," says Milhaupt. "We're hoping we can be an important part of their growth, and vice versa." At the end of the day, The Wolff Company believes it can play a part in improving the state of the seniors housing industry. "We're not saying we have all the answers. We're trying to make improvements in a sector where we think we could improve the product," says Milhaupt. "Our best attribute may be that we're not so involved that we simply say 'Well, we've got to do it this way.' That's not how you get better as an industry." Although he doesn't have a crystal ball, Milhaupt worries that seniors housing companies are putting too many eggs into a single basket when it comes to seniors. He understands compa- nies are looking forward to the "silver tsunami" — the demo- graphic wave of Baby Boomers reaching the target age for seniors housing. However, he believes niche product will be the key. Rather than a tsunami, he predicts "100 different little waves." "There will be many niches," says Milhaupt. "Product that doesn't even exist right now will resonate with residents. "It's not going to be a one-size- fits-all answer. Anybody who counts on that to fill units is going to be mistaken." n Revel Issaquah is a 146-unit, independent living community in Issaquah, Washington for residents age 55 and over. The Wolff Company is developing the property, which is scheduled to open late this year.

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