This coverage of the 2017 National Investment Center for Seniors Housing & Care Spring Investment Forum is brought to you by Mainstreet. As the nation’s largest developer of transitional care properties, Mainstreet specializes in real estate development, value investments and health care. With Mainstreet’s support, SHN is bringing event coverage of the NIC conference, which draws developers, providers and operators within the post-acute and preventative health care services space.
After entering the senior housing space about three years ago, Oppidan Investment Company is going big, with a $400 million development pipeline in the works and partnerships with well-established operators.
Founded in 1991, Oppidan built its reputation largely as a developer of retail properties; it now has completed more than 400 projects valued at more than $2.7 billion. The company seized an opportunity that came its way in 2014 to develop a senior housing community in the community of Woodbury, close to Oppidan’s headquarters in the Twin Cities suburb of Excelsior, Minnesota.
That project—dubbed Red Rock Senior Living—moved quickly, going from groundbreaking in 2014 to being open and fully leased up in 2016, Oppidan Vice President of Development Shannon Rusk told Senior Housing News last week at the National Investment Center for Seniors Housing & Care (NIC) Spring Investment Forum in San Diego.
Though not intending to sell the property, Oppidan again took advantage of an opportunity that came its way, Rusk said. Toledo, Ohio-based real estate investment trust (REIT) Welltower Inc. (NYSE: HCN) bought the property for an undisclosed price, Oppidan announced earlier this month. The 77-unit building includes 39 high-end independent living and assisted living apartments, 32 for memory care, and six suites. It is operated by Ebenezer Management Services, the senior housing arm of Minneapolis-based Fairview Health Services.
However, the sale of Red Rock did not mark the end of Oppidan’s involvement in the senior housing space. Currently, the company has an estimated 1,100 units either open or under construction. There are four active projects in Minnesota and one in Napa, California. The total development pipeline represents a $400 million investment, Rusk estimated.
This week, a new community in the Twin Cities suburb of White Bear Lake is scheduled to open its doors. The other Minnesota developments are located in the city of Mankato, the Twin Cities suburb of Shorewood, and near the University of Minnesota in the Minneapolis neighborhood of Prospect Park. The Prospect Park community is slated to be the largest, at nearly 300 units, with university partnerships in the works for programming. Ebenezer is the operating partner for all of these projects.
Even as it becomes a major presence in the Land of 10,000 Lakes, Oppidan is eyeing coastal markets, according to Rusk. And it already is in the process of obtaining permits for a community in Napa, California, to be operated by Tucson, Arizona-based Watermark Retirement Communities.
The Oppidan Model
With concerns about senior housing oversupply circulating, Oppidan is highly disciplined and empirical in its market selection, Rusk emphasized.
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“We spend an inordinate amount of time on the pro forma,” she said. “We’ve selected locations and sites with supply and demand that’s going to make sense, and we’ve passed on many. We listen. We’ve got a few third-party market study companies we work with … and we look to our operator to make sure we’re not suggesting rents that just make a pro forma look good.”
Oppidan’s first foray into senior housing, with the Woodbury project, initially involved an operator relationship that did not work out. The relationship with Ebenezer began through a request for proposals that Oppidan issued, Rusk said. Similarly, the Watermark relationship began through an RFP.
“I’m not sure if we just got lucky. Half of this is luck,” Rusk said of connecting with these operators. “They’re great. I think we’ve got the best of the best, and that’s probably more important than having a good location.”
Oppidan developments are amenity-forward, with the goal of creating an active lifestyle vibe rather than a clinical one, although the health care piece is present in the background. Independent living and assisted living units are fully interchangeable, with the only difference being that the level of services provided is higher in AL.
One benefit of this arrangement is that residents do not feel like they have to re-locate to a different class of unit as their needs increase, Rusk said. It also allows the property to respond nimbly to market demands.
“We plan per pro forma that there will be this many independent living and this many assisted living units, but if you have 50 IL units and 50 AL and on day one you get 100 IL [customers], we can move them all in,” Rusk said.
So far, Oppidan itself has provided all the equity and financing for its senior housing developments, but it is open to other partners as lead volume in this space grows. And the company expects to keep expanding its senior housing portfolio, given the favorable demographics.
“There hasn’t been day-one for the baby boomers moving into senior housing yet, so it’s going to be here for a long time, but you’ve got to be smart,” Rusk said.
Written by Tim Mullaney