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REVIEW SUMMARY
Industry. Construction, development, senior housing
Trend. A few area construction firms have found work amid the recession in senior housing.
Key. Demographic trends and national statistics project more growth
Gulf Coast construction firms attacking the recession have a new weapon in one of Florida's oldest markets: the elderly.
It's not a boom, at least not by Florida boom standards, but the senior housing market is presenting opportunities for several local developers and builders. The work is steady, if not always glamorous, and it can produce higher margins than some other sectors.
“It used to be a very small segment of our work,” says John Wiseman, president of the Sarasota-based Florida division of Core Construction, an Illinois firm. “But it has been quite a lot of work for us lately.”
Senior housing, in terms of construction projects, generally falls into four categories: Independent senior living homes and apartments; assisted living homes; skilled nursing homes; and continuing care retirement communities.
Core's Florida unit will be around $54 million in statewide revenues in 2010, says Wiseman, which is well off the $100 million annual mark it previously surpassed in the state. Senior housing makes up at least 60% of Core's Florida work this year and Wiseman says there are a slew of projects in the sector in the works for next year.
Fort Myers-based Wright Construction Group has also recognized the trend. The $40 million company is the lead firm on a large expansion and renovation of the Shell Point Retirement Community in Fort Myers, a nonprofit continuing care retirement community that provides services to more than 2,200 residents.
Another good sign for the sector is the confidence of Thilo Best, chairman and CEO of Tampa-based Horizon Bay, which manages more than 90 senior living properties in 18 states. Best considers 2010 and forward a golden era for senior housing. In a previous interview with the Business Review, Best based his optimism on a projection that the number of Americans who will turn 85 will increase by 33% over the next five years.
Supply and Demand
The shift to senior housing is also happening outside the Gulf Coast, with several demographic trends and statistics leading the way.
For example, the National Investment Center for the Seniors Housing & Care Industry, a nonprofit research firm, reports trailing-twelve month construction starts for independent and senior living homes nationwide increased in the second quarter of 2010. It represents the first rise in senior housing construction starts since the first quarter of 2009, the center reports.
Moreover, the organization predicts that the forces of supply and demand could be at work now and in future months. That's because while 20,000 senior housing units were delivered nationally in the first quarter of 2008, only 2,300 units in the entire sector were built in the fourth quarter of 2009.
“There will be a fair bit of product coming on in the next two to three months,” NIC President Robert Kramer says. “We've seen a great pick-up in demand.”
Kramer, however, points out that acute challenges face developers and builders who seek to get into senior housing. For one, like any other construction sector, it is a battle of wills, and patience, to obtain financing. And another, sometimes overlooked challenge, is to be certain to have a good management team in place to run the facility.
One more sign this trend has life: Colliers International, one of the largest commercial real estate companies in the world, formed a senior housing division in June. The unit, run out of New York by senior housing industry veteran Mark Silver, will work with owners and potential investors in the sector, states a company release.
“With an aging population, the senior housing sector is a critical and growing niche,” Silver said in a late June press release. “There is a real need in this sector and a tremendous opportunity for Colliers International.”
'Like a cruise'
Core has capitalized on that opportunity. The company, which also has offices in Arizona, Nevada and Texas, works in every sector of senior housing. Current and recent projects include:
• Villa Grande, Sarasota: The project, now under construction, is planned as 108 senior-rental apartments spread over three buildings in a gated community. The $9.5 million project, developed by Altamonte Springs-based LeCesse Development, also includes a parking garage with 96 spots and a 7,600-square-foot clubhouse.
The project, just off a busy intersection at Beneva and Fruitville roads, stands out in that it's one of the only large-scale construction projects going on in that area of town. “The site is killer,” says Charles Hall of Winter Park-based Realty Equity Partners, who is working with LeCesse on finding local investors for the project. “You can't get a better site than that.” (See the Construction Guide insert in this issue, for more on the project.)
• Water's Edge, Bradenton: Developed by nonprofit Florida Christian Homes, this project combines independent living apartments with an assisted living facility. Core's work at Water's Edge included the recently completed $14 million Lake House at Water's Edge, a 109-unit independent living facility.
Wiseman says the Lake House was built with a fun living style in mind, to reach out to active seniors. “You go in there and it's like a cruise,” says Wiseman. “You could go there and never want to leave.”
• DeSoto Palms, Sarasota: The developers behind this project, an assisted living facility, are a group of doctors from Sarasota-based Intercoastal Medical Group. The 84-unit community opened Aug. 19.
Wiseman says DeSoto Palms, which cost $15 million, was one of the more luxury-infused senior housing projects the company has recently done. The apartments include screened porches, for instance, and the complex has a private dining room and a beauty salon. The project was also the sixth largest in terms of value in the Sarasota-Manatee market in 2009.
• Banyan Senior Apartments, Port Richey: The core of this project, developed by Sarasota-based Beneficial Communities, is to provide homes for seniors on a limited income. Beneficial is one of the 10 largest developers of affordable housing for seniors in the country.
The 94-unit community, a combination of one- and two-bedroom apartments, opened late last year.
• Woodland Terrace Acute Nursing Home, Citrus County: This project, a 120-bed skilled nursing facility, combined residential elements with a secure facility for patients. The building is one-story and 68,000 square feet.
Recession cushion
Core's other senior housing projects spread from a new nursing home in Sarasota to work in Fort Pierce and Mount Dora. “We are very good at this work,” says Wiseman, who adds that Core isn't totally reliant on the sector. Other current projects include student housing for Edison College in Fort Myers and a museum on Marco Island.
But Core has nonetheless become something of an expert in the senior housing niche. And Wiseman says the work isn't without its challenges.
A big challenge, in fact, is not likely to surprise many Gulf Coast builders and developers. That would be the Byzantine bureaucracy that must be navigated to launch and complete a project.
For Core, that means the firm's project managers have to work through an alphabet soup of local, state and federal agencies that regulate the senior housing industry.
“There are a lot of things that create conflict and misunderstandings,” says Wiseman. “Trying to figure out what to do is hard.”
Construction firms, meanwhile, aren't the only entities seeking to capitalize on the senior housing growth spurt. Beneficial Communities, for example, has several other projects in the works, in addition to the one Core recently built in Pasco County.
And Dr. Randy Powell with Intercoastal Medical Group has entered the industry from the developer side — along with nearly 20 of his fellow doctors and a dozen other local investors. The investors, behind the DeSoto Palms facility built by Core, have already put in about $2.5 million of their own money into the project, Powell says.
“This is the first time we will be an owner,” says Powell, a family doctor. “We were looking for something to develop that we knew something about.”
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