Senior Living Developer Swings Big with $1 Billion Canadian Pipeline

Canada’s senior housing sector continues to attract big money from both national and U.S. investors looking to capitalize on the market’s robust opportunities for acquisition and development. For some players, including one Montreal-based senior housing owner-operator-developer, the opportunity is to the tune of more than $1 billion. The reach is so big, that this provider is aiming to double its units under management with its pipeline of new projects.

That’s the plan for Le Groupe Maurice, which intends to build 17 senior housing complexes throughout Quebec and Eastern Ontario during the next five to six years, company founder Luc Maurice tells SHN.

Le Groupe Maurice currently operates 20 properties exclusively across Quebec , comprising approximately 7,000 units overall. While each of the properties contains about 325 units, on average, an additional six properties that are already under construction will each house an average of 350 units.

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“Overall, right now we have 7,000 units and we plan to double that,” Maurice says. “Our net asset value is $1.4 billion and we’re confident to reach $3.2 billion or so within the next six years.”

A vast majority of the company’s units, and units to be developed, are independent living with a slim proportion catering to assisted living residents. Typically, in a building that has 325 units, about 20-25 of them are geared toward people who have difficulty with autonomy, Maurice says.

As for the $1 billion pipeline to be deployed over the next five to six years, the company, which is funded by pension funds, plans to use that capital to build three to four properties per year, ranging between 320 and 420 units depending on the sites it acquires.

“Our view is to focus a lot of energy towards developing sites that are totally in sync with the community; where you find a lot of community services as well as commercial services being accessible,” Maurice says.

For such services to be “truly accessible,” Maurice says they have to be within one block of his company’s properties. This is critical, given the average age of entry for Le Groupe Maurice’s residents is between 74.5 and 77.5 years old. This is young compared to the United States, where 51% of assisted living residents residents are 85 and older, according to the National Center for Assisted Living.

“Accessibility is key,” he says. “For our clientele, three to four city blocks is ‘another town.’”

Quebec by the numbers

Of all the Canadian provinces, Quebec commands the strongest senior housing presence, as about 18.5% of Quebec seniors live in 1,300 retirement homes in the region, according to a June report from the Canada Mortgage and Housing Corporation (CMHC).

This total supply, which is nearly half of the 2,794 senior housing communities across Canada surveyed by CMHC, accounts for 111,973 units across Quebec.

Le Groupe Maurice prides itself on providing senior living with an array of services and amenities without forcing residents to break the bank.

For someone to live in a full-size, one-bedroom apartment, the monthly rent is $1,700, whereas for two- and three-bedroom apartments, monthly rents range between $2,500 and $3,000, Maurice says.

To live in one of the company’s assisted living residences, rents are more in line with those in the United States, at about $3,500 to $4,000 a month, mostly due to the increased assistance that comes with those units, he says.

In the U.S., the national median monthly rate for a one-bedroom, single occupancy assisted living unit was $3,600 in 2015, according to Genworth’s 2015 Cost of Care Survey.

“If you succeed at touching the lifestyles of an older crowd at a reasonable price, you create a solid, strong market for the years to come,” Maurice says.

The demographics for Quebec are promising.

Seniors aged 65 and over represented 15% of the province’s total population in 2011. This is roughly the same as the national percentage of 14.8%, according to the most recent year tracked by Statistics Canada.

However, by 2041, Statistics Canada projects about 25% of Quebec’s population will comprise seniors aged 65 and older. Other stat trackers like the Institut de la Statistique du Québec project that residents aged 65 and over will begin to outnumber those under 20 years old beginning in 2023.

The demographic trends are enticing for those in the senior housing business—so much that Le Maurice Group is not the only Canadian senior housing developer with billion-dollar plans.

A billion-dollar market opportunity

In March, Reseau Selection, a Laval, Quebec-based developer and manager of 26 retirement complexes in Canada, announced a five-year investment plan valued at $2 billion.

This pipeline will produce 30 new residential complexes for seniors in the Greater Montreal region, according to comments made by company CEO Real Bouclin during a forum held by the Board of Trade of Metropolitan Montreal that month.

“This investment plan responds to an expanding market and will make it possible to meet growing demand from seniors, who will represent one-quarter of Quebec’s population in 15 years’ time,” Bouclin said in a written statement.

While the demographics favor Quebec when it comes to the impending demand for senior housing, the province is still just one piece of Canada’s widespread aging boom.

By 2030, the year in which the youngest Baby Boomers reach age 65, close to one in four Canadians will be at least age 65 and older, according to projection scenarios from Statistics Canada. This compares with just 15.3% of all Canadians in this age group in 2013.

And some big-time U.S. senior housing investors have already taken notice of the attractive Canadian market, enticed by the impending demographic surge and a favorable cap rate environment, said CBRE in its “Canadian Market Outlook 2015” released last December.

Health Care REIT (NYSE: HCN) has been the most active in Canada among the “Big Three” senior housing real estate investment trusts (REITs).

In May 2013, the Toledo, Ohio-based REIT invested in Ontario-based operator Revera Inc.’s $1.35 billion portfolio, which included 47 senior housing communities with approximately 5,000 units located across Toronto, Vancouver and Calgary. The transaction created a 75%/25% joint ownership venture, with Health Care REIT commanding the greater share.

The two companies most recently expanded this relationship in June through with an agreement to acquire Regal Lifestyle Communities Inc., a Toronto-based owner and operator of 23 senior housing communities with more than 3,600 units, for a purchase price of $623 million.

But for Le Groupe Maurice, the company has no plans to expand outside of its comfort market in Quebec, despite having been approached by “a few” U.S. REITs, Maurice says.

“Nobody knows the future, so we’ll keep everything open,” he says. “But, we have not considered going into the States, nor going into other provinces.”

Written by Jason Oliva

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