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Commercial Real Estate
Business Observer Friday, Feb. 26, 2021 7 months ago

Senior living communities look for their moment

With communities that look more like lush gardens on the outside and are run like a cruise ship on the inside, a few senior living developers set a high bar.
by: Mark Gordon Managing Editor

The sense of despair — in addition to dirt and grime — at a south Sarasota County assisted living facility overwhelmed real estate executive Manuel Borrajo when he toured the facility about four years ago.   

Borrajo, with Coral Gables-based RAM Capital Management, was at the facility, Gulf Winds in Venice, with some colleagues. The conditions were so dire that staff couldn’t even cook in the kitchen, Borrajo recalls. They instead cooked outside on portable grills. “It was an incredibly dilapidated building,” Borrajo says. “To this day we can’t believe all the things the health department allowed to go on there.”

State health officials with the Agency for Health Care Administration had been investigating the building’s conditions, under previous ownership, since 2015. The state agency ultimately cited the property for 14 violations and ordered it to shut down. RAM Capital acquired the property in January 2016 from a court-appointed receivership through a bank that planned to foreclose on the property. Under the entity ALF Venice, Borrajo and his partners paid $2.2 million for the 15,000-square-foot facility, which is on 4.38 acres.  

That purchase, and a significant investment into a major renovation and expansion, represented RAM Capital’s entry into the senior living market. The company has since acquired another facility, in Naples, and has renamed both under the Green Village brand. The model is to buy and repurpose facilities that will focus on using green spaces and secured courtyards, what company officials call “pleasant and stimulating outdoor environments.” That strategy follows well-documented research in elder care, Borrajo says, that sunlight, fresh air and friendly surroundings promote physical and mental well-being.

Backed by $40 million from a high-net-worth investor in Miami, RAM Capital — with the ability to leverage up to $100 million if the deals are right, Borrajo says — is attempting to scale a senior living business at a noteworthy junction in for the sector: Long valued by commercial real estate investors and developers for its consistent high occupancy rates and solid margins, the industry has been battered and bruised by the pandemic.

Occupancy rates nationally, and in the Tampa region, are at 15-year lows, according to new reports from the National Investment Center for Seniors Housing & Care. Another telling stat: Rent concessions in memory care, assisted living and independent living complexes were on the rise in the third and fourth quarters, NIC reports.

“Since February 2020, COVID-19 has significantly impacted skilled nursing operations across the country due to high acuity levels of residents, pandemic-related deaths as well as fewer elective surgeries at hospitals, which have resulted in less need for rehab services often provided by nursing care properties,” NIC stated in a report released Feb. 10. “As the country and the skilled nursing sector navigate through the winter months and vaccine distributions, it is likely that occupancy will continue to face pressure.”

Courtesy. RAM Capital Management partners, from left, Andre Nunes, Rogerio De Laurenzi and Manuel Borrajo. They own two assisted living facilities under the Green Village brand, one in Naples and one in Venice.

Despite those and other challenges, Borrajo, 58, and his partners at RAM Capital, including Rogerio De Laurenzio and Andre Nunes, consider senior living a long-term investment, going out at least a decade. RAM Capital’s target is to own 10-12 Green Village facilities in Florida by the end of 2023, mostly through acquisitions, but the company will build new if the opportunity is right, executives say. “COVID-19, God willing, will be a short-term challenge,” Borrajo says. “We are looking beyond COVID-19.”  

Big investments

At least two other companies in the region take a similar long-term approach to the sector. One, Bonita Springs-based Discovery Senior Living, is doing that on national scale. On Feb. 12 the firm, with $366.3 million in revenue in 2019, announced the acquisition and rebranding of 16 senior living communities across Texas, North Carolina and New Mexico. Company officials say the purchase, which will be introduced under the brand Morada Senior Living, is the single largest acquisition in the history of the company, founded in 1998.

Morada Senior Living will be based in Dallas and operated as a wholly-owned Discovery subsidiary, according to a statement. The acquisitions were done in partnership White Oak Healthcare REIT.  

Another company making some big moves in senior living is Lakewood Ranch-based Autumn Senior Living. The company plans to open its latest project, an assisted living and memory care community in Clearwater under the brand Aravilla, in April. Phase one, Autumn President Robert Ross says, a $20 million to $25 million project, is expected to have 90 residents at stabilization. Autumn recently received its certificate of occupancy for Aravilla Clearwater, which will encompass 170,000 square feet of indoor and outdoor living space.

Ross, 65, is aware of the trends in declining occupancy in senior living but considers it primarily a short-term blip. “Right now our mindset is on getting through COVID-19 and having a great opening in Clearwater,” he says. “We are well on our way to doing both.”

Ross manages another community under the Aravilla brand in Sarasota, in addition to Cabot Cove of Largo and Aravilla Osprey, in south Sarasota County, which is under development. The money behind Autumn, Ross says, comes from a group of local investors who pooled money like an equity fund to invest in properties that span Florida’s west coast. Autumn builds in phases, Ross says, to limit financial exposure. “You don’t want to bite off too big of a chunk at one time,” says Ross, who, prior to co-founding Autumn in 2007, worked for Gaspar Properties in Tampa, where he led the conversion of a 32,000-square-foot warehouse built in 1917 into office space.   


Generational change

Autumn, RAM Capital Management and Discovery Senior Living have varying business models within senior living, but all the companies, for the most part, are chasing the same thing: to build supply that stays ahead of the demand for a new kind of senior living environment. That primarily means facilities built for baby boomers, not the "greatest generation," like many were a few decades ago.

File. RAM Capital Management recently acquired an assisted living and memory care facility in Collier County, renaming it Naples Green Village. High-end touches and a focus on green spaces are a big part of the model.

“The need for senior memory care is overwhelming,” Ross says, adding the need will last long beyond any pandemic challenges.

Borrajo, at RAM Capital, sees the need as well. A onetime architect and Wall Street analyst with Standard & Poor's who moved to the Miami area in 2003, Borrajo and his partners got into the industry somewhat by accident. They had the money first and were going to buy land in Coral Gables. “We wanted to be in the real estate sector,” he says, “but didn’t know how we were going to spend our funds.”

A comprehensive study on the Coral Gables land suggested senior living as the best use of the land for a return, but the deal never materialized. RAM Capital shifted to the property in Venice and a second one in North Naples it acquired in late 2018. That building, Naples Green Village, underwent a complete renovation from April 2020 through November, then opened in February. RAM Capital, under the entity GV Naples Propco LLC, paid $6 million for the property in December 2018, Collier County property records show. They spent at least another $2 million on the renovations. 

The renovations to both Naples Green Village and Venice Green Village, Borrajo says, were dramatic. By one example he says a new roof in Venice cost about $200,000. The Venice building work ranged from new windows to new doors to new vanities in the bathrooms. “It was a huge amount of work,” he says. “It was very elaborate what we had to do.”

‘COVID-19, God willing, will be a short-term challenge. We are looking beyond COVID-19.’ Manuel Borrajo, Venice Green Village/Naples Green Village

Naples Green Village, meanwhile, includes some touches that represent its higher-end market, such as a dining room with classical crown moldings and columns that, according to a statement, “defines an elegant space.” Borrajo adds that the green spaces and courtyards there — there are five outdoors spaces in total — are what also sets the facility apart from others in the area.

No compromise

Autumn Senior Living also focuses on the higher-end of assisted living, but with a twist: The company’s focus is on creating what Ross calls senior housing as a resort. In a pre-pandemic world that meant a bevy of fun activities, multiple restaurants and interior designs built around socializing. “We joke around that what people should really call us is cruise ship directors,” Ross says.

Mark Wemple. Robert Ross co-founded Autumn Senior Living in 2007.

That’s one of the biggest changes he’s seen in 15 years in senior living — a shift from a "God’s waiting room" mentality to creating a place more representative of the resident’s previous home. “Just because people are in an assisted living home, that doesn’t mean they want to give up on some of the things they’ve lived with before,” he says. “They don’t want to compromise.”

One of the biggest challenges Ross says Autumn faces is finding and retaining employees — an obstacle, of course, exacerbated by COVID-19. Autumn uses outside vendors for the skilled care work in its communities but has in-house employees for what Ross says is the company’s core strengths: food, entertainment and care. “It’s very difficult to find good staff,” he says. “That’s been very challenging.”

At RAM Capital, the model is to own, not operate, so the challenges are different. Borrajo says his biggest challenge is finding the right facilities to buy.

File. RAM Capital Management recently acquired an assisted living and memory care facility in Collier County, renaming it Naples Green Village. High-end touches and a focus on green spaces are a big part of the model.

Officials at both Autumn and Ram Capital, like many others in the industry, share one trait: They like the idea of being in a commercial real estate sector that has a higher purpose to go with the hunt for profits. “We all know we have to make a profit; we are running a fund,” Ram Capital’s Andre Nunes says. “But at the end of the day, we want to impact people’s lives.”


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