While many existing operators have tried to create a more affordable senior housing product for those who can’t spring for the average senior living monthly rent or buy-in fee, many have faced challenges, spurring new models of both development and finance.
Now, one entrant new to senior housing—but experienced in apartment development—is making a play at the middle market for senior housing, drawing from its experience in multifamily housing. Drever Capital Management, led by founder and company chairman Maxwell Drever, has set its sights on a pipeline of properties to be re-developed in select markets nationwide.
With a background in workforce apartments that house thousands of Americans, Drever has partnered historically with life companies as financial backers. In its apartment developments, the San Francisco Bay-area company has incorporated after school programs and other specialized services to maintain residents’ happiness with their housing. And largely, that’s how Drever says it has retained its residents year after year, ahead of the competition.
“Our retention rate is 17% higher than the competition,” says Drever. “We have always done the least attractive type of apartments, and now we are doing the same thing, going into the space that no one wants to go into.”
To date, the company has targeted turnaround opportunities, having recently taken a Richmond, Va. assisted living project called Chesterfield through a conversion process that turned all of its 48 units into private pay memory care. The catch: monthly rents average $3,500—much lower than competitive memory care units in the area. And Drever plans to spend $500 million in development costs on its senior living endeavor, the company says, in addition to debt financing. With an operating partner in Renaissance Communities, Drever has four more projects that are shovel-ready, and is seeking additional opportunities.
Some simple design features and amenities are being implemented, such as wine bars instead of traditional lounge areas that are today losing their appeal among senior residents. The company includes exterior features such as window shutters for a home-like community feel. On the other hand, the communities, which will be branded Drever Renaissance Communities, eliminate some features that Drever sees as extraneous.
“We don’t have a lot of fancy amenities that people see and don’t want to pay for,” Drever says. “We are trying to appeal to residents with champagne tastes, but who have beer budgets. It doesn’t have to be the Taj Mahal, but you can still give great amenities.”
Drever is currently seeking capital partners, and sees an advantage in its multifamily partnerships and strong performance metrics over time, though it is new to the senior housing space. Social responsibility is another angle Drever is pursuing in its development of capital parternships.
There is plenty of opportunity, the company says, for the repositioning of existing assets into much more affordable community types, with rent targets around 1,700 for independent living light units without any services, versus the going rate across the market around $3,000.
“We thought we’d missed the [investor] market opportunity, but we’ve realized that everyone is so first bottom line-oriented that there’s a whole niche that is for those who are triple bottom line-oriented,” Drever says. “They not only want financial returns, but also social and responsible returns.”
Written by Elizabeth Ecker