Exclusive Webinar Panel: Seniors Housing Development Landscape Changes Amid Pandemic, But Continues Nonetheless

Although COVID-19 has changed the realities of the seniors housing sector, development has adapted and forged ahead.

That’s according to panelists on a webinar titled “Seniors Housing Development Pushes Forward” held Sept. 9. Presented by Seniors Housing Business and sponsored Moves for Seniors, panelists included Charlie Jennings of Harbor Retirement Associates; Bryan Schachter of Watermark Retirement Communities; Rob Leinbach of Cadence Living; Robert Burg of Moves For Seniors; Matt Johnson of McFarlin Group; and moderator Richard Swartz of Cushman & Wakefield.

To view the full webinar, click here.

All the developers in the group said that their new construction projects were moving forward. Harbor Retirement Associates, for example, has opened two seniors housing communities during the pandemic and plans to open four more during the next 120 days.

But that doesn’t mean there haven’t been complications. Jennings notes that, according to NASDAQ, lumber prices rose 85.4 percent between July 1 and Aug. 20. While subcontractors are hungry for the work and lowering bid prices, the materials costs are skyrocketing.

“We just had a bid in the Midwest, and it was the highest number of subcontractors that have ever bid on an individual project. We’re seeing some signs of softening in the prices,” said Jennings. “Unfortunately, those are being offset by what’s happening in the lumber markets.”

Capital has also become extremely scarce. Swartz said that lenders are looking for “deeper pockets and a bigger credit score.”

Although Cadence Living has received two acquisition loans and two construction loans during the pandemic, Leinbach noted that nonrecourse financing has dried up completely.

“We were searching for nonrecourse. It doesn’t exist,” said Leinbach. “We used to get five to 10 bank term sheets [per loan], but now we’re seeing two to three — and none were very fun to read.”

Cadence had never considered looking to HUD for construction financing before, but is now considering that option, added Leinbach. “You have to get creative and understand you need to show your financials.”

Schachter noted that Watermark has moved forward with all of its planned development, but only with the help of partners who believe in the long-term benefits of the seniors housing sector.

“It’s more difficult to get people on board, but there are still opportunities out there. The right groups are patient, see the medium- and long-term strength of the industry and thus far haven’t been spooked away. None of our deals have been called off, but we have re-strategized and changed the timing of some of those projects.”

What does the future look like?

One of the hot topics in the industry since the pandemic struck was how much change would be temporary versus what is here to stay.

Cadence is considering changes to the physical design of its buildings, such as constructing a model apartment that has its own entrance so prospective residents don’t have to enter the main living areas. Independent living areas should have their own entry point, rather than having all residents and staff come in the same door, said Leinbach. This way, if there are future lockdowns for higher levels of care, independent living residents can still come and go.

“Everything is on the table,” said Leinbach. “When we see a piece of dirt, we’re looking at adding some cottages — we’ve seen those do very well throughout COVID.”

Other COVID-19 design considerations include HVAC filtration systems, touchless faucets, antimicrobial surfaces, outdoor amenities, visitation areas that allow social distancing and multiple dining venues so residents can spread out.

Before the pandemic even struck, McFarlin Group was already focusing on development of active adult properties. This is closer to standard multifamily and is more likely to catch the first wave of baby boomers, who are still about 10 years younger than the average seniors housing resident, said Johnson.

Harbor is implementing what Jennings calls “no-brainers” for the future, such as touchless controls and antimicrobial, NSF-certified countertops like those used in restaurant kitchens. However, he encourages developers not to make rash decisions until the pandemic has passed.

“You have to be very careful about overreacting right now,” concluded Jennings. “The last pandemic we had was 100 years ago. None of us knows what the post-COVID world looks like.”

— Jeff Shaw

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