The seniors housing development market is increasingly drawing attention from investors outside the senior living world. Some of you may have seen multifamily investor Drever Capital Management, with a portfolio of 170,000 apartments for middle income families, entering the seniors housing business with a plan to spend upwards of $500 million over the next 10 years in acquiring and developing senior housing properties, including independent living, assisted living and memory care projects.
This isn’t the first foray into seniors housing world for Drever, which in 2012 purchased a 4-year old independent living community with 124 units in Lexington, South Carolina when the community was 50% occupied. Drever invested $3.7 million in the property, hired Renaissance Senior Communities to manage it, brought occupancy up to 90% and just recently brought in Aron Will of CBRE’s Senior Housing Debt & Structured Finance team to arrange a $12.5 million floating rate bridge loan placed through a regional bank with a five-year term, 24-month interest-only period.
Citing this success story, Drever plans to partner with experienced investors, including Renaissance, and invest up to $500 million in seniors housing acquisitions and development, to be financed with about 70% debt and the remainder, equity. One of its upcoming projects, in San Antonio, will feature 150 independent living units, 56 assisted living units and 24 memory care units and will cost approximately $40 to $45 million, or $184,800 per unit assuming a $42.5 million project cost. And Renaissance will operate it.
None of these numbers are too alarming, especially considering the $500 million target is over 10 years and spread between acquisitions and developments, and the turnaround story is a good sign. But we have been noticing an increasing number of investors with no seniors housing background pouring vast amounts of money into the development market. Anecdotally, we have also received a number of calls from small developers with a piece of land wanting to build assisted living. And as valuations for seniors housing acquisitions keep going up, more and more investors will see development as the relatively cheaper alternative where they can still get a bite of the apple.
