Silverado was the eighth-largest memory care provider nationally as of 2016, and the company now is set to grow its footprint by expanding into a new part of the country.
A property being developed in Alexandria, Virginia, will be the first foray into an East Coast market for Irvine, California-based Silverado. Scheduled to open in early 2018, this will serve as a “beachhead” property as Silverado looks to add more communities around Washington, D.C., and in other eastern metro areas, according to Paul Mullin, the company’s senior vice president of development.
It took finding the right partner and the right opportunity for Silverado to go coast-to-coast, but it’s a move that the company has long considered, Mullin told Senior Housing News. Currently, Silverado operates 36 memory care communities across Arizona, California, Illinois, Texas, Washington, Utah, and Wisconsin.
“We’ve always had our eye on the major metros of the Northeast,” Mullin said.
Cracking A Tough Market
The stars began to align about a year ago, according to Mullin. That’s when Ben Firestone of Blueprint Real Estate Advisors brought together Silverado President, Chairman, and CEO Loren Shook and Cambridge Healthcare CEO Graham Adelman.
Cambridge was in the process of designing a new memory care facility next to an existing skilled nursing building in Alexandria. A shrewd developer of skilled nursing and assisted living, Adelman decided that he wanted to work with a focused memory care operator, Mullin said.
“We began a year of conversations and meetings in our communities, and there was an alignment of our business cultures to the point that we worked out a management agreement,” Mullin said.
While the cultural alignment was critical, it was not the only consideration; Silverado also carefully scrutinized the metro D.C. market.
Generally speaking, Silverado looks for three to four key performance indicators when evaluating markets, Mullin said. These are home values in the area, household income, and the prevalence of seniors and the incidence of dementia within that population.
The Alexandria opportunity met all these criteria, and there was an additional advantage.
“There was a real vacuum of service when it comes to memory care,” Mullin said.
Several providers, including Sunrise Senior Living and Brookdale Senior Living (NYSE: BKD), have a significant presence in the region, but these communities are more focused on assisted living rather than specialized memory care, Mullin said. And there hasn’t been a “brand-new, purpose-driven, ground-up” development in the Alexandria area in about 20 years.
That appears to be changing. In addition to the Silverado project, there’s a new Brandywine Senior Living building going up nearby. But the development activity, and the communities already open in the area, do not concern Mullin. In fact, these other senior living providers could help drive referrals to Silverado, for residents who need particular memory care services, he said.
“We think there will be complementary providers, not so much competition,” he said. “Brandywine is one of our partners with [real estate investment trust] Welltower, so we look forward to working with them.”
Stringent licensure requirements, and the cost of construction in dense East Coast markets, also should help keep supply in check.
“It’s an incredibly difficult market to penetrate,” Mullin said. “Graham [Adelman] had spent three to four years getting this site entitled next to his skilled nursing building. That gives you a window into the world of trying to build in Northern Virginia.”
As for cost, a typical Silverado building with 90 to 100 beds costs around $20 million to open, according to Mullin. In the case of the Alexandria project, which is slated to serve 66 people, that cost is running up to the $30 million mark, given that the community will be three stories with a subterranean garage, needs to withstand cold winters, and is in an urban area.
“In general, any metro area—New York, Los Angeles, D.C.—will be more expensive,” Mullin said.
Silverado plans to execute a similar strategy on the East Coast as it did when entering the Chicago market: open a beachhead property, expand to four or five buildings to gain brand recognition, then begin to co-locate services such as hospice and at-home care.
“Now, in Chicagoland, we’re actively looking to grow our hospice business,” Mullin said. “Then we look at opportunities to co-locate our at-home services.”
There’s no hard-and-fast timeline in D.C., though.
“The idea is to get the property stabilized to around 90% census within 18 months, if possible, and then consider our options,” Mullin said. “It all depends on how quickly the building will fill. It’s kind of a test case. We believe it will fill very quickly.”
With the caveat that there’s no hard timeline, he does think it’s reasonable that Silverado would have four or five communities in the D.C. area within the next five to 10 years.
And the Virginia beachhead also opens up Silverado’s access to the Tri-State Area of New York, New Jersey, and Connecticut.
“Alexandria and D.C. are an Amtrak ride to New York City and the Northeast,” Mullin said. “So, quickly—within the next five to ten years—we could expand throughout the East Coast.”
In the last decade or so, Silverado has shifted from doing a lot of acquisitions to preferring ground-up development. The company would prefer to purpose-build its developments on the East Coast as well, although it might bite if there were an “incredible opportunity to acquire,” Mullin explained.
The Alexandria building was in the design process when Silverado came on board, but the provider was able to collaborate with lead architect and interior deisgner Perkins Eastman and the other project stakeholders. Silverado helped tweak some of the dining and activity areas, add sensory spaces, and pull out residential washer/dryer units on the floors in favor of building in commercial laundry capabilities, Mullin said.
The rents, though not yet set, will be higher than are typical in suburban California, he said, but he believes that the local population both can afford the rates and will want the Silverado experience.
“This community [will have] more space than a single-story [building], and it’s planned out very well,” he said. “It’s first-class.”
Written by Tim Mullaney
Photos Courtesy Silverado