Is This Sector the Smartest Long-Term Play?

With demand booming for decades to come and incredible ROI, seniors housing is catching the eye of institutions for the first time. (Science is keeping us alive longer, so we have to live somewhere.) Panelists at yesterday's Bisnow Houston Seniors Housing Summit shared why this niche sector may just be your smartest investment.

175 attendees heard that our changing demographics make the sector hard to resist. Belmont Village Senior Living CEO Patricia Will says “as far as the eye, can see, there’s demand.” And lenders are on board too: CBRE SVP Aron Will says today’s financing environment surpasses anything he’s seen before, and it’s largely thanks to the recession. Seniors housing was the only property type to trend positive through the downturn, so now even institutions (which Patricia said wouldn’t take seniors housing for free in the ‘90s) want in. They used to lean towards independent living because it most resembles multifamily but now prefer assisted living because it’s need-driven.

Patricia predicts the market will be absolutely booming in 20 to 30 years, a boon for her sons in the industry. If you hadn't noticed our first-ever mother-son panelist pairing, it was a family affair yesterday: We snapped Patricia and hubby Cameron’s Ed Will with their sons, fellow panelist Aron and Belmont Village’s Adam Will. Just don't expect that demand to hit overnight, she says. Everyone talks about the wave of Baby Boomers, but she’s one and doesn’t plan on going into seniors housing for quite a while. Her parents’ generation is the current target; her average resident is 87 years old. (Having met Herbert Hoover is a prerequisite.)

Aron (who got back from his honeymoon Monday night—his new wife was on hand to support him) says other sectors might be “location, location, location,” but seniors housing is “operator, operator, location.” (Not to be confused with "duck, duck, goose.") Lenders want to see your development has an operator who’s competent both in the specific property type (for example, assisted living vs. independent living) and in that geography (seniors housing is hyperlocal) before they analyze other facets of your project.

Rees Associates chairman Dr. Frank Rees, who focuses solely on designing seniors housing nationwide, says he’s not surprised to see so many people entering the sector—he invested in a seniors housing project a decade ago, and its value has tripled. But our panelists stressed that picking the right operator as early as possible will make the difference not only in the long-term success of your property, but also if it’ll get built at all. (It's about drafting the right quarterback... if only the Texans could learn that.) Frank asks clients to lock in their operator before he’ll begin the design process. He just doesn’t believe a project can succeed if you build it and then find someone to run it.

Cadence McShane’s Bob Bedrich (here chatting at his booth) tells us our sponsor is just wrapping up construction of 82-unit Legacy at Falcon Point in Katy for PinPoint; it’ll deliver at the end of the month. It’s also building a 140-unit project for PinPoint in Leander.

We found our sponsor Morris Architects’ Brian Don Carlos and Hector Covo with Linbeck’s Daina Pitzenberger. Morris is working on several projects with Belmont Village but says they’re too secret to discuss just yet.

We snapped our sponsor Bury’s Jacob Woelmer, Damita Fedor, Jason Atkinson, and Ziad Kaakouch. They’re working on two seniors housing projects in North Houston near the airport. Jason tells us it’s hard to find a site for seniors housing—about two-thirds of tracts he tours don’t work. The big sticker is that sites priced right usually have some civil engineering hurdles. (His totally objective suggestion: Bring on a good civil contractor like Bury early.)

We've got plenty more coverage coming in tomorrow's issue (including the best places to build and how much it'll cost to live in one), so don't miss it!