Not long ago, Senior Housing News spoke with Silverado Senior Living’s co-founder and CEO, Loren Shook, about the growing market for memory care and the partnership his company had formed with Meridian Realty Advisors. This week, we’re taking a look at the other side of the partnership through an interview with David Ronck, the president and chief operating officer of Dallas, Tex.-headquartered Meridian.
The real estate investment management and development organization’s primary focus has traditionally been in the long-term care, skilled nursing sector, but through the Silverado deal will be developing up to 10 memory care communities which will be operated by Silverado upon completion.
In the interview, Ronck talked about what made his company branch into the memory care space; the thought behind its development strategy; and his outlook on the long-term care industry.
Senior Housing News: What brought you into the memory care space?
David Ronck: We had been looking for ways to take our knowledge and expertise and eventually try to build into our portfolio a private pay source. About 60-65% of revenue is either state- or federally-funded money in most long-term care buildings.
We said it’d be nice to be a needs-based business, which we believe is memory care. It fits well into our model [primarily skilled nursing centers]: people need to go, so let’s try to give them the best setting that we can, and the best care.
This new venture with Silverado has folded nicely into that model. We wanted to align ourselves with the highest quality operators that we could. As we began to venture into this memory care space, we firmly believe Silverado is the gold standard. …We’ve met a lot of folks in the seniors healthcare space. It became a natural fit for us.
SHN: Can you talk more about the deal with Silverado?
DR: Our primary focus is still actively looking for skilled nursing development opportunities, but our more recent focus is beginning to build out this focus with the Silverado folks.
The deal with Silverado in two tranches: We have agreed to build five [communities], and at the end if it’s still working out well, we’ve agreed to build five more. Historically, we have never been an operator in the traditional sense. We’ve sponsored, built, and developed the nursing home, but we haven’t managed it.
The pace of building these buildings folds into their desire to absorb and assimilate the properties into their operating portfolio.
We broke ground in Austin [Texas] at the end of April and are focusing our efforts on a site under contract, we’re waiting on final city approval on building permits in Peoria, Ariz.
SHN: What’s your development strategy?
DR: We have identified a second site in Austin to look at clustering a skilled nursing building with Alzheimer’s care, with the idea being (with Silverado, our primary focus) clustering in certain markets. We look in existing markets that we like that are strong demographically, including age and income level.
Those numbers seem to work in markets in regions where Silverado already has a presence, either in the general metro area, or in a given region in the state. The idea is to go into new markets with a desire to cluster additional markets. It’s not just throwing darts at a map.
We didn’t want to end up in a situation where we’re in a strong market, but that has outliers. We want to go into a market with demand for additional growth, and it makes sense to cluster them to allow operators to strengthen base of the support they have in those regions.
[For the Silverado projects,] we want to get them leased up and stabilized, as if we wanted to have a REIT come in and purchase the project. We assume someone will be out there to buy the building, but we underwrite them as if we were going to own them. We’d like to do more [development in the future] but we have to be careful.
SHN: Is there a move away from the long-term care nursing home model?
DR: We’re not going to wake up and not need nursing homes. I don’t believe there’s one universal model that fits for everything. I believe in more localized, home-based, community-based care, but there is still a great demand and need for the traditional nursing home. I don’t believe there’s just one broad-brush approach to this. We’re seeing in certain markets the idea of more neighborhood service vs. common centralized services.
You’re seeing that individual-based care idea coming into the traditional skilled care business. I think it’s going to force a change in the way the traditional nursing home is going to look and operate.
Back 10-11 years ago when we started building our first buildings– the market wasn’t very discerning. It’s not that the old model doesn’t work; it’s that it doesn’t work in all locations.
We like our buildings. We feel like we have a very strong anchor with the current skilled nursing operators we’ve aligned ourselves with. We’ll continue to put buildings in place to lease to those operators (such as the deal with Silverado).