MorningStar Teams with Hines on Developments, Will Enter Texas

MorningStar Senior Living has amassed a portfolio of communities in the western half of the continental U.S. Now the company is entering the Texas market with a prominent developer in place.

Denver-Based MorningStar announced Thursday it is partnering with Hines Interests, the Houston-based international real estate developer, to build a senior care community in Houston’s River Oaks neighborhood. MorningStar Assisted Living & Memory Care at River Oaks will break ground in the first quarter of 2020, with an anticipated Q3 2021 opening, and will include 112 units for assisted living and memory care. MorningStar and Hines will co-invest, co-develop and co-own the community.

This will bring MorningStar’s total portfolio to 27 communities in Arizona, California, Colorado, Idaho, Iowa, Montana, Nevada, New Mexico and Oregon, in addition to the River Oaks community.

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The River Oaks project will not be a one-off project, MorningStar founder and CEO Ken Jaeger told Senior Housing News.

Two years ago, Hines discussed expanding its senior housing interests with several operators including MorningStar, with experience in developing and operating Class-A senior housing facilities in high barrier to entry markets. MorningStar discovered that its core cultural values and mission aligned with Hines’.

The two companies are currently doing due diligence on other Texas markets, as well as the Rocky Mountain region and California. This could set the stage for a sustainable development pipeline.

“We could end up doing two or three projects, or 10 to 15. It depends on the timing,” Jaeger said.

River Oaks is an affluent market with an aging population compared to Houston as a whole. The population density is 2% higher than the greater Houston area, while the median age is 33% higher, according to Census Bureau data. Males between the ages of 65 and 84 account for 15.8% of the population, while women in the same age bracket 14.4% of the population.

Twenty-five percent of households earn more than $200,000 annually, while another 20% earn between $60,000 and $100,000 per year.

River Oaks is home to existing senior living. Houston-based Bridgewood Property Company co-owns and operates The Village at River Oaks, a 198-unit continuing care retirement community (CCRC) in the neighborhood with its investment partner, Harrison Street Real Estate Capital.

Bridgewood and Harrison Street recently refinanced the community with a $55.5 million package.

The favorable demographics were a leading decision in MorningStar’s decision to build in Houston, Jaeger told SHN. Hines presented MorningStar with the River Oaks site and, after doing its own research, the provider agreed.

“We told them this was a home run. River Oaks is in great need of an assisted living and memory care community. With Hines in the fold, this facility will be world class,” he said.

A January study from senior living development consulting firm Plante Moran identified MacAllen, Texas as the top U.S. metro market ripe for senior housing development, while El Paso ranked eighth. San Antonio saw the largest year-over-year growth in senior housing occupancy in the second quarter of 2019, according to the most recent occupancy report from the National Investment Center for Seniors Housing and Care (NIC). Houston’s senior housing occupancy was on the low end of the spectrum at 81.1% in Q2, but the market saw a 2.2% increase in occupancy over the previous quarter.

Moreover, the number of households in Texas age 85 or older is expected to increase by 70% between 2015 and 2030, and NIC Chief Economist Beth Burnham Mace told Senior Housing News in July. She added that Texas’ business-friendly environment may be more conducive to senior housing development, moving forward.

Having Hines as an investment partner gives MorningStar a potential edge for market penetration in the Lone Star state. Hines has $124.3 billion in assets under management, as well as a pipeline of 148 projects under development around the world. The firm

is no stranger to senior housing development and has a history of choosing urban main street locations to build communities, usually in joint ventures. The firm partnered with Welltower (NYSE: WELL) on two high-profile developments in Manhattan: a 15-story building on East 56th Street operated by Sunrise Senior Living; and a 17-story community on the Upper West Side.

Hines and health care investment company Sentio Investments announced a partnership in June 2018 aimed at creating a portfolio of health care real estate, including senior housing. The firm is also a partner in Lincoln Common, a mixed-use redevelopment in Chicago’s Lincoln Park neighborhood where Houston-based Belmont Village Senior Living recently opened a 156-unit senior housing community.

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