In a continuing care retirement community (CCRC) development market that has yet to fully rebound to its pre-Recession highs, one developer/operator is anticipating sizeable growth in the coming years to the tune of a billion dollars.
While CCRC construction has lagged this year relative to other senior living property types, many developers have turned toward expanding and renovating their existing communities rather than new ground-up development, whereas others have targeted new markets entirely.
One developer, however, is harnessing the best of both worlds as it looks to increase its footprint within overlapping markets while simultaneously bolstering its existing communities with a slew of expansion projects.
“We strongly believe we’re at the beginning of a great future for this type of product,” Erickson Living’s Senior Vice President of Corporate Affairs Adam Kane told SHN. “We’re active in developing new communities, as well as acquiring.”
In the first quarter, 2,600 CCRC units were under construction, representing only 1.1% of current supply and a level that is 76% below the property type’s mid-2007 peak, according to data released last month by the National Investment Center for the Seniors Housing & Care Industry (NIC).
Additionally, about two-thirds of those 2,600 units are in the nonprofit construction sector, with most of that construction focused on expansions, one NIC research analyst noted during an industry webinar last month with National Real Estate Investor.
Erickson Living, which develops and operates 19 entry-fee CCRCs in 10 states across the U.S., broke ground this year on a new CCRC in New Jersey.
Dubbed Lantern Hill, the 540,000-square-foot CCRC in New Providence, New Jersey, offers 275 independent living apartment homes and 85 continuing care residences offering assisted living, memory care, long-term care and short-term rehabilitation.
Lantern Hill, which is Erickson’s third in the state of New Jersey, fits into the company’s strategy of developing communities in markets where it already has a presence, said Kane.
“We find there are a lot of synergies by having multiple properties in one market,” he said.
Erickson, which commands 23,069 units in its network, is the seventh largest senior living provider in the nation in terms of resident capacity, according to March/April 2014 data compiled by the Assisted Living Federation of America.
Contrary to targeting untapped regional opportunities, Erickson looks to the markets where it’s already operating for growth potential.
In Maryland and Virginia, Erickson has five CCRCs, and two properties in each of the Baltimore, Boston and Philadelphia markets. In the Washington, D.C., market alone the company has over 4,500 units.
“We’re looking in markets where Erickson already has a strong brand recognition and market position, where we can capitalize on our brand and the efficiencies of having another project in the area,” Kane said.
While Lantern Hill might be the only new development Erickson has already under construction—though it is currently in the planning phases for another large scale CCRC in North Carolina—the company has been aggressively expanding its existing communities, said Kane.
In 2013 alone, Erickson spent over $100 million on construction of continuing care neighborhoods at its existing communities, adding 550 healthcare beds to the company’s portfolio, Director of Communications and Corporate Affairs Dan Dunne told SHN via email.
Today, Erickson is in the midst of building nine new residential buildings at seven of its developing communities.
“It gives great value for the resident and community when you expand an existing campus,” said Kane. “Larger scale projects create efficiencies on the costs side and the service side, while also making the community financially stronger by bringing more amenities to residents.”
Other providers in the CCRC market would agree that the benefits of expansion projects are multi-faceted in not only increasing residents’ acceptance of rent increases, but also fortifying the community’s financials.
Looking ahead, Erickson anticipates investing at least a billion dollars worth of more development in the years to come.
“Currently, plans for the next 5 years include investing over $1 billion in construction—which reflects the company’s financial strength and strong platform for growth,” Dunne said.
Written by Jason Oliva