HHHunt Corporation plans to invest $128.4 million to develop new senior living communities this year under its Spring Arbor brand. The Blacksburg, Virginia-based firm also intends to enter the active adult space and is on track to have a development pipeline underway by the fourth quarter of 2019.
The new Spring Arbor developments include two assisted living and memory care communities that are slated to open May 1, Janet Riddlebarger, president of HHHunt’s Asset Management Group, told Senior Housing News this week at the Senior Living 100 conference in Laguna Niguel, California.
One of these buildings is a 93-bed community in Crofton, Maryland, and the other is a 109-bed community in Frederick, Maryland. A third Maryland property — in the town of Olney — is currently being built.
Looking further into the future, HHHunt is preparing to develop its first Spring Arbor project in the state of Delaware, Riddlebarger said. Located in the beach town of Rehoboth, this property will be the northernmost location in the senior living portfolio, which currently includes 21 owned and managed properties across North Carolina, Virginia and Maryland.
Also this year, HHHunt plans to break ground on two new memory care projects, in the Virginia towns of Leesburg and Fredericksburg. One will be 40 beds and the other 48 beds.
Although these new buildings will be devoted exclusively to memory care, they both will be in close proximity to existing Spring Arbor assisted living communities.
HHHunt as a rule likes to create an AL-memory care continuum, whether that means having the two levels of care in the same building or in separate, nearby buildings, Riddlebarger said. She is not surprised that some standalone memory care operators have struggled in recent years, saying that it can be difficult to create a strong referral pipeline without having an assisted living population to draw from.
This development activity comes after HHHunt posted more than $500 million in revenue in 2018. The company’s revenue has increased more than 70% over the past five years, according to a press release issued Wednesday. The firm is a diversified real estate developer, builder and management company. In addition to its senior living arm, it has four divisions: HHHunt Apartment Living, HHHunt Communities, HHHunt Homes and HHHunt Properties Development.
The company is owned by Harry Hunt, with some long-time associates also having stakes, and provides the equity for all its developments. On the debt side, the firm in recent years moved away from the HUD 232 program for senior living in favor of traditional financing that takes less time to process, Riddlebarger said.
Navigating current headwinds
Like other senior living companies across the country, HHHunt has been affected by elevated levels of new supply in the last few years.
In particular, Spring Arbor communities in eastern North Carolina have seen occupancy declines as a result of market conditions, Riddlebarger said. Across the portfolio, some buildings have maintained occupancy in the mid-90% range while others have dipped into the mid-80% range.
Adding to the supply-related challenges, labor markets have gotten extremely competitive, and wages and other workforce-related expenses have risen.
HHHunt’s development strategy and operational model have both evolved in response.
Development sites have become harder to come by, Riddlebarger noted. The firm carefully evaluates a range of factors for each potential location, with special attention to labor availability and certain demographic factors.
For example, the Delaware site was attractive because HHHunt determined that a local workforce is available, despite it being a beach town. Often, labor is priced out of living close to senior living communities located close to beaches, Riddlebarger noted.
Also on the labor front, HHHunt has implemented several initiatives over the past few years to drive recruitment and retention. The firm hired a talent acquisitions director, who worked with a team to launch a program called Work With Us Here. This provides incentives for current workers who refer family and friends.
HHHunt has also expanded its digital platform for posting jobs, and hiring and training new employees, Riddlebarger said. Engagement and effectiveness scores improved.
Rents across the portfolio vary, but Spring Arbor communities generally are positioned as more of a middle-market offering rather than a luxury option, Riddlebarger said. However, the company is trying to find areas where consumers can afford to move into assisted living as a lifestyle choice rather than being forced into these communities after a health event.
Winning over these lifestyle-driven residents — who tend to be younger, healthier and have longer lengths of stay — is not easy. But HHHunt has been moving toward a wellness model that Riddlebarger believes will appeal to this group.
In particular, the company has upgraded some of its communities with spacious and well-equipped wellness centers and is partnering with local organizations on programming.
“Some communities, not ours, they’ve taken space the used to be a staff lounge or something and tried to make it into a wellness [space],” she observed. “Ours is a larger, much more deliberate space.”
New developments are also being designed to facilitate wellness, with an emphasis on common spaces and outdoor spaces for social interaction. HHHunt is starting to market more to seniors who are living at home, to drive move-ins from this segment as opposed to referrals from health care providers.
Entering the ‘55 and better’ space
HHHunt is also looking to attract a younger, healthier resident by starting to develop active adult communities — although the company may not use that terminology.
These types of communities are on the rise but there are many different versions being developed and many terms to describe them, from active adult to “55 and better” to independent living, Riddlebarger said. She added that independent living tends be defined as having features like a commercial kitchen while active adult is more of a traditional multifamily building, but “it’s very blurred.”
“Right now what we’re working on is how to develop a product that appeals to a younger boomer who’s not ready for assisted living,” she said. “What does that product look like and in what locations do we do that? We’re mulling all that over.”
HHHunt has identified some potential sites for development and is aiming to have a pipeline underway by Q4 of this year.
It’s too early to say how large that pipeline will be or what markets specifically are in play, Riddlebarger said. However, she suggested that a continuum of care model with nearby assisted living and memory care would make sense.
Creating a standalone active adult-style building without easy access to higher levels of care would increase the risk that residents will do all they can to age in place for long periods of time, she surmised, and so the residence might turn into a de facto assisted living setting.