Senior Living Developments Go Bad Without Team Approach

Senior housing development is an inherently risky business. To minimize this risk—and avoid going over budget—it’s crucial for developers to have a variety of stakeholders at the table from the beginning.

The senior housing industry already employs a much more collaborative approach to development than the public sector, Dana Wollschlager, principal at Plante Moran Living Forward, said last week as the Senior Housing News 2018 Summit in Chicago. But senior housing developers could still stand to boost transparency among owners, operators, architects and contractors throughout the process.

“Getting the team at the table early on is absolutely critical,” said Brian Pangle, president and CEO at Clark Retirement Community, a nonprofit continuing care retirement community (CCRC) based in Grand Rapids, Michigan. “Otherwise, I think, you risk a bad project.”

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Clark Retirement is currently working on two different development projects for about $45 million, Pangle said.

Don’t forget the bankers

Most senior housing developers are concerned about three things in particular: cost, quality and schedule.

“The only way that you can really control all that is having everybody at the table at the same time,” Brian Goodwin, senior preconstruction manager at Minneapolis-based commercial real estate services firm Ryan Companies US, Inc., said at the SHN Summit. In reality, the parties involved in senior living development projects have a lot of different considerations to make at any given time.

“People really think it’s a linear timeline—it isn’t,” Wollschlager said.

Clark Retirement Community learned firsthand that transparency among all of its team members working on a new project is key. In fact, Pangle believes he should have involved certain players in the process even sooner.

“I would’ve gotten our investment bankers to the table a little bit earlier,” he admitted.

Too often, finance providers are left out of the conversation, Wollschlager suggested—but they shouldn’t be, as developers should regularly be ensuring that capital will be available for the project’s different phases. It’s also important to include HUD experts in the discussion given the complexities of HUD financing.

There are other benefits of including just about everyone—from owners to technology experts to culinary staff to current residents—in the senior housing development process, he added. Goodwin agreed.

“[They can offer] outside-of-the-box thinking that can help that project move forward,” Goodwin said.

“We all collaborate on a regular basis on every decision we make,” Perkins Eastman Principal Joe Hassel said.

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Correcting a ‘lack of understanding’

Some senior housing developers demonstrate “a lack of understanding” when it comes to the necessity of spending money on feasibility studies, panelists agreed.

Ryan Cos., for instance, has had clients who were prepared to spend $45 million on a project, but were hesitant to do a site feasibility study that would cost an additional $7,500.

In Goodwin’s view, it’s better to spend the $7,500 and discover everything there is to know about a site, rather than spend eight months dealing with unforeseen burdens that a feasibility study would have easily identified. Plus, in the time it would take to factor in and make unexpected construction changes, another developer that has done its due diligence could swoop in and build a project on the site first, Goodwin added.

Clark Retirement has embraced this mentality of spending money upfront to achieve desired results on time.

“We’re paying more on the front end, but I am certain we will get the right project on the back end,” Pangle said.

Clark Retirement is also exploring potential joint ventures with for-profit operators. The organization believes think that the process will be similar to partnering with non-profit operators, though the for-profit organizations may have more internal resources.

“Just because we’re not-for-profit doesn’t mean we’re not capable business people,” Pangle said.

All the while, top architecture firms aren’t going to work with senior housing developers who haven’t done their homework. That’s certainly the case at Perkins Eastman, which has worked with unprepared clients in the past, and has been willing to walk away.

“It’s better losing a project that’s going to turn out unsuccessful,” Hassel said.

Written by Mary Kate Nelson

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