Hard Hit CCRC Market Sees Booming Post-Recession Comeback

After a relatively flat market for continuing care retirement community finance following the housing crash and subsequent recession, financing activity is coming back—and then some—in even the hardest hit areas like Florida.

SantaFe Senior Living, a not-for-profit affiliate of SantaFe Healthcare, Inc. saw the product of the downturn firsthand when it brought a strategic repositioning of a Cutler Bay CCRC community to market for financing in 2010. While the financing was halted and delayed for months on end, the project team saw the delay first as a major setback. But the terms under which it ultimately gained financing earlier this year and now the fill up of the community have led its leadership to believe the delay may not have been such a bad thing after all.

East Ridge at Cutler Bay, near Miami, had a 50-year legacy under its belt with 350 residents on its 76-acre entry-fee CCRC campus. Looking to grow in 2008, SantaFe Senior Living was approached to help reposition the campus.


“It was relatively complicated,” says SantaFe CEO Troy Hart of the project. The project required replacing a health care center and finding enough clear space to house existing residents throughout the transition.

By 2010, the team, which comprised investment bank Ziegler and advisory Greystone, was ready to move forward. The economy was not.

“We had a package that for all intents and purposes was ready to go,” says Greystone Vice President Roger Randall of bringing the project to market. “But the board called a meeting and came out saying they weren’t comfortable issuing that amount of debt with too few incremental revenue producing units in that environment.”


While the team was comfortable with controlling revenue and expenses, it was concerned about the level of move-ins and covering debt service without having control over entrance fees, Randall says.

“They couldn’t take it to market,” Randall says of the board decision.

Fast forward to 2014 when the majority of U.S. housing markets are on the upswing and senior housing occupancy is following. According to projections from Ziegler in February, the number of CCRCs expected to finance in by the end of 2015 jumped from eight to 18 between September and the February report.

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Ziegler arranged $68.95 million in tax-exempt, fixed-rate bonds for East Ridge in March and the fill up has been stronger than anticipated pre- or post-recession.

“Progressive not for profits have gotten back to the point of thinking strategically rather than defensively, where they were three years ago,” says Rich Scanlon, managing director for Ziegler. “That’s the camp SantaFe was in back in Fall 2010 where we had completed the structuring process for bond issue for repositioning and the board said the time was not right.”

But the turnaround has not only encouraged operators, owners and financial partners, it has exceeded their expectations, as is the case of SantaFe, and the terms are better.

Simultaneously, SantaFe has been filling another one of its communities, the Terraces of Bonita, on Florida’s West Coast.

“The organization got the sense that the stars were aligned again,” Scanlon says.

With move-ins booming and financing expected to double what was initially projected, the question remains: is the surge in Florida a case of new interest, or merely an inflow of pent-up demand?

“There may be a little bit of catch up ball being played,” says Scanlon. “But I think what it is more than that is the good organizations have gotten so smart about how to market to age- and income-qualified potential residents that they know how to tailor their marketing programs, what incentives work and what incentives don’t work. They have gotten very scientific in how they utilize those dollars to attract dollars to the communities.”

Had the project been financed as planned, it would have been a missed opportunity, Hart and the financing team agree.

The 2014 project includes 90 new assisted living units instead of 60; 31 memory support instead of 23; and 74 skilled nursing units where originally 60 were planned. The community added 78 revenue producing units compared to the 24 planned initially.

“It’s much more robust,” Randall says, noting the project was able to save nearly 200 basis points in its financing terms. “It’s a much more robust financial performance out of a project for having to live through a little bit of heartburn.”

With East Ridge now 86% occupied and its new construction project Bonita Springs in the mid 70s, SantaFe says while it didn’t hope for the recession, it wasn’t such a bad thing after all.

“It absolutely benefited us to wait,” Hart says. “At the time we didn’t have a crystal ball but with hindsight being what it is, we wouldn’t have done it any differently.”

Written by Elizabeth Ecker

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