One of the fastest growing real estate companies in the U.S. is entering the competitive active adult senior living sector, and has brought in a veteran senior housing investment specialist to develop and execute its strategy.
Last month, Irvine, California-based Passco Cos. hired Carey P. Levy as president of its development business, where he will oversee development, value-add acquisitions and repositioning, construction and financing across the commercial real estate spectrum. Levy previously served in the same capacity from 2007 to 2013.
A 30-year real estate veteran, Levy was most recently chief operating officer of Granite Investment Group, where he developed a portfolio of over 40 senior housing properties, with a particular focus on skilled nursing.
Senior housing will be an integral part of future development strategy for Passco, which has $2.7 billion of assets under management. For the past 20 years, the company has focused mainly on market-rate multifamily acquisition and management, Levy told Senior Housing News. But the influx of capital into senior housing and favorable age demographics make now the right time to enter active adult.
“[Our] investors have not been exposed significantly to this market,” he said. “This is a chance to bring Passco to the non-acuity active arena.”
Active adult is now second only to independent living among senior housing investors, according to the 2019 Senior Housing Outlook Report from Hunt Real Estate Capital and Senior Housing News. SHN’s 2018 report, “The New Active Adult Housing,” shows how active adult fills the housing gap for people age 55 and up.
But investors and developers entering the space need to do their due diligence if they want these developments to be successful.
Passco is still locking down the details of its development strategy, but the company already has two ground-up developments in the works, Levy said. The first, in Palm Desert, California, will contain 161 units. Residents will enjoy concierge services and resort-style amenities
The second community is in Germantown, Tennessee, a suburb of Memphis.
Although active adult generally targets the 55-and-up demographic, the communities Passco wants to build will target the 65-85 demographic and it is looking for markets with positive growth trends in that age group, while allowing them to live within their economic means. The boomers are looking to simplify their lives but live in an environment that is invigorating, offering a variety of opportunities for wellness within its peer group, Levy told SHN.
“We are not geographically restricted,” he said. “We’re geographically conscientious about serving the right demographics with the right projects.”
In addition to new development, Passco wants to build its active adult portfolio through repositioning and value-add strategies, Levy said.
That could be a multifamily property that lends itself well to converting into senior living. It can also mean acquiring a community with untapped value via mismanagement, poor marketing, partnership disputes or a lack of liquidity by owners.
These opportunities would need to have solid per-unit costs, compared to replacement, which would reduce the risk significantly when repositioning while eliminating the entitlement process, Levy said.
“We believe if you look long/hard enough, those projects exist,” he said.
Once Passco builds its first two communities, the firm expects to have a new development pipeline of one to two communities annually, as well as acquiring two properties a year for redevelopment or repositioning. Long term, the company expects to enter independent living but will refrain from investing in assisted living and memory care, Levy said.