A Minneapolis-based commercial real estate services firm is beginning to invest in senior housing—to the tune of $500 million per year.
The firm—Ryan Companies US, Inc.—isn’t entirely new to the senior housing space, as the company has developed about 2,700 senior housing units in the last five years, Eric Anderson, Ryan Cos. vice president of development-senior living, tells Senior Housing News. Until recently, though, Ryan hadn’t actually gone on to own any of the senior housing properties it had worked on.
Now, that’s going to change.
“The target for next year is to do somewhere between eight and 10 communities with between 170 and 240 units each,” Anderson says.
Ryan will own all of these communities, which will each offer different levels of care—independent living, assisted living and memory care—to minimize risk.
“We’ve chosen not to go into [only] a single sector just because of the volatility in leasing and performance,” Anderson says.
The project costs for each community will range from roughly $43 million to a little over $50 million. This means that Ryan plans to develop approximately $500 million worth of senior living per year for the foreseeable future.
“We view this as a multi-year approach,” Anderson says. “Obviously, market conditions, cost of capital and debt will impact any given year. The broad goal is to do two to four projects with each of our three operators every year.”
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Currently, Ryan Cos. has working relationships with three senior living operators: Des Moines, Iowa-based Life Care Services (LCS); Scottsdale, Arizona-based Cadence Senior Living; and Bloomington, Minnesota-based Grand Living Management.
Cadence is focused on developing new senior living communities with Ryan in the southwest, Anderson says. Ryan is working with Grand Living to develop communities in places like South Dakota and Florida, and it’s working with LCS to develop more communities under LCS’ Clarendale brand in Illinois, and possibly Arizona and Tennessee.
In the future, Ryan Cos. will likely begin working with additional senior living operators.
“We have to align both culturally and financially, and we want those people to co-invest with us,” Anderson says of potential new partners.
‘More recession resistant’
The thought of investing in senior housing appealed to Ryan Cos. for a slew of economic reasons.
For instance, senior housing—unlike office real estate—“becomes more recession resistant, and we’re attracted to that,” Anderson says.
“On the rent side, you typically don’t see [senior housing] operators reducing rents in a downturn,” he adds, noting that office building owners are often forced to lower rents.
Plus, Ryan’s existing geographic reach means that it can theoretically partner with senior living operators all over the country and immediately know the ins and outs of different states’ health codes and architectural laws.
“If you’re an operator that wants to go to more than one region, we know how to do it,” Anderson says.
Written by Mary Kate Nelson