McCaffery Interests’ entry into senior housing can be summed up in three words.
“Development follows demand,” CEO Dan McCaffery told Senior Housing News.
The Chicago-based developer broke ground last week on Modena Reserve at Kensington, a $75 million, 135-unit community with independent living, assisted living and memory care in Kensington, Maryland with operating partner, Denver-based Solera Senior Living.
This marks McCaffery’s entry into senior housing and the start of an ongoing relationship between the company and Solera. The joint venture is close to securing a second site in the Washington, D.C. market and is looking at up to five other locations to build senior housing. The firm’s development pipeline value may eventually exceed $500 million, McCaffery COO John Ziegenhein told SHN.
McCaffery is determined to get senior housing right. The product has been on the company’s periphery for years, but the operational intensiveness of senior housing was one obstacle until Solera came around, he said while speaking to SHN at Bisnow’s recent “Chicago State of the Market” event.
“We’re kind of fussy on the product — [the design] has to 100% meld with the function,” he said. “You’re fooling yourself to think that you can just go out and do senior housing. You probably need some coaching.”
McCaffery Interests spent much of the current real estate cycle building multifamily, office buildings and mixed-use projects, and has over $3 billion in completed developments. One of the most recent is Lincoln Common, its redevelopment of the Children’s Memorial Hospital campus in Chicago’s Lincoln Park neighborhood.
Across the street from Lincoln Common, Houston-based owner-operator Belmont Village opened a Belmont Village opened a 156-unit senior housing community in August. McCaffery had sold that parcel of land to a venture of Harrison Street, which co-developed the senior living building with Belmont Village.
The age demographics in Lincoln Park favored building senior housing in the neighborhood. McCaffery sees this as a microcosm of the larger trend of baby boomers that will need the product over the next decade, and he wants to have a say in meeting that demand.
McCaffery notes how downtown cores across the country have been transformed into vibrant, 24/7/365 areas for live work and play, in large part from the demand from millennials over the past 20 years. And he views boomers as being a similar change agent for senior living. The incoming generation will need a combination of active independent living, or some help with their care.
“There’s a saying: ‘Statistics are for liars and liars make statistics.’ But the stats are true about an aging population,” McCaffery said.
Modena Reserve at Kensington will include multiple dining venues, a penthouse lounge, a 10,000-square-foot courtyard, a wellness center with a fitness studio and therapy gym, and a full-service wine bar. Living units will feature hospitality-inspired designs, while the common areas will include open floor plans and a full slate of innovative technologies geared toward maximizing the resident experience.
One thing that will be a must in McCaffery’s site selection is walkability. The sites currently being vetted will give future residents the opportunity for walking and exercise, as well as to be incorporated into the larger communities in which they will be built.
Another detail McCaffery is considering in its site selection: the distance between a site and places of worship.
“As you get older, you become modestly more religious,” McCaffery said.
McCaffery Interests is one of a growing trend of developers from traditional real estate classes entering senior housing. Houston-based developer and real estate services firm Hines Interests partnered with Sentio Investments in 2018 to create a portfolio of health care real estate, including senior housing. Hines partnered with Toledo, Ohio-based health care real estate investment trust Welltower (NYSE: WELL) on two senior living high-rises in Manhattan, and has announced partnerships with MorningStar Senior Living and Watermark Retirement Communities to develop senior housing.
Last year, Atria Senior Living announced a partnership with luxury residential developer Related Cos. to develop a $3 billion pipeline of high-end senior housing. The venture’s first development is a 214-unit community in San Francisco licensed for assisted living.
Headquartered in Chicago, McCaffery Interests has offices in Washington, D.C., Denver, and Pittsburgh, and is looking for opportunities in those markets.