Chance played a role in bringing Douglas Wilson Companies into the senior living development business, but the firm is not banking on good luck and favorable demographics alone to succeed. The 26-year-old company has partnered with an established operator, is seeking private equity backing and is positioning itself to become a notable player in one of the nation’s major markets.
Founded in 1989 and headquartered in San Diego, Douglas Wilson Companies has experience in constructing and managing various types of properties; its developments include a $155 million condominium project and a mixed-use office and hotel valued at $165 million. It also provides problem resolution and fiduciary services, as well as brokerage services, and describes itself as the largest firm of its kind, having provided receivership services in over 1,000 matters involving assets valued in excess of $15 billion.
“About two years ago, we sat down as a family enterprise and said, what kind of asset class do we want to develop and hold on to as a source of cash revenue?” Chairman and CEO Douglas Wilson tells Senior Housing News.
Perhaps not surprisingly, given the demographic tailwinds, senior housing emerged as the answer.
But it wasn’t until six months later that a friend of the firm put it in touch with Calvary Chapel—the church had a plot of real estate that was essentially ready-made for senior living, complete with the right titles and other bureaucratic necessities.
The opportunity was “very, very serendipitous,” Wilson says.
A market study of the area—San Diego County’s Eastlake region—came back with favorable findings. Douglas Wilson Companies forged ahead with a joint venture, under which Calvary can maintain its nonprofit tax status while taking an economic stake in the for-profit senior housing community to be built on the land.
At this point in the story, despite Douglas Wilson Companies’ pedigree, warning lights might be going off for established senior living owners and operators. They’ve noted an influx of untested developers entering senior living recently, enticed by the thought of rising consumer demand and enabled by the availability of capital.
The potentially destabilizing effects of these developers creating sub-par projects is creating much anxiety in the industry, according to a recent survey.
Some of this concern might be because the establishment doesn’t want anyone new in the sandbox, Wilson surmises. Still, he gives credence to the worries.
“I think that’s a legitimate concern in a lot of businesses, if you have not ready for prime-time players getting involved,” Wilson acknowledges. “By aligning with a well-regarded operator, I think we defuse that.”
That operator is Vancouver, Washington-based Milestone Retirement Communities LLC. The company has a footprint throughout the West and Southwest, as well as one community in Virginia.
After meeting with numerous different operators, the relationship with Milestone clicked, Wilson said.
“The thing that really solidified it for us was when we met with their executive team, there wasn’t a lot of ego there,” he said. “They’re very passionte about the business, they’ve been in it a long time and have a lot of respect in the industry from peers and financing communities. And they recognized that they didn’t really have the development credibility we had, so to align with us would help them as well to facilitate their growth.”
The venture is moving forward quickly now, with hopes to break ground early next year. A name has not yet been chosen but is under discussion; still, Douglas Wilson Companies already is putting together a plan for sourcing other opportunities.
The projects themselves likely would be 100- to 125-bed assisted living communities with a memory care component. The potential footprint would span from Southern California to neighboring areas of the Southwest, but not too far afield, according to Wilson.
While some markets are showing signs of overbuilding, fueling concerns about a surplus of assisted living supply, it appears that the geographic area eyed by Douglas Wilson Companies might indeed be a strong region to support new developments. Los Angeles, San Diego and Phoenix have good profiles when it comes to supply risk over time, according to a recently released analysis.
As for financing, Douglas Wilson Companies is looking for an institutional equity partner along the lines of the Carlyle Group, and is finding “strong responses” from capital providers, Wilson said. The plan is not complicated from this standpoint, he added.
“Raise the equity, put in a co-invest piece, get a construction loan, stabilize [the property], put in a permanent loan,” he summarized.
In what might serve as some reassurance to long-time senior living players who are worried about the impact of new entrants, Douglas Wilson Companies acknowledges its newcomer status and is trying to tap into the expertise of industry veterans. In addition to seeking out highly reputable partners for the operations and investment pieces, the developer has tapped Ewing Architects, a firm with senior living experience, to design the first community.
“We wanted to surround ourselves with the best and brightest,” Wilson said.
Written by Tim Mullaney