Fresh off opening a senior living highrise it developed in its home base of Seattle, Columbia Pacific Advisors is pursuing further urban projects while also scaling up its portfolio of middle-market Hawthorn communities.
Since joining Columbia Pacific in 2012, Managing Director Todd Seneker has led the development, acquisition and repositioning efforts of over 25,000 senior living units, in addition to overseeing activity in other real estate types.
Today, the private investment and development firm — co-founded by industry pioneer Dan Baty — has a senior housing portfolio of about 200 open communities, managed by about eight different operators. Seneker is particularly proud of one of the newest additions to that portfolio, the Murano.
Murano is a 24-story luxury senior living community, operated by Leisure Care, located in Seattle’s First Hill neighborhood. The community includes public-facing space such as Trubistro, the first retail outpost for Trucup, the low-acid coffee company owned by Leisure Care parent company One Eighty.
“We’re trying to do more of that,” Seneker told Senior Housing News, referring to this type of mixed-use, urban, rental community with a continuum of care.
At the same time, Columbia Pacific is expanding its presence in the middle-market independent living space by developing new Hawthorn Senior Living communities, building on the 79-property portfolio that the firm acquired in 2017. Analysts estimated a $2 billion pricetag on that transaction, although Columbia Pacific has not confirmed that number.
Targeting urban cores
While senior living oversupply has hit certain markets hard over the past several years, city centers are still largely underserved, Seneker observed. That’s due to several factors, including that other types of real estate have historically been seen as the highest and best use of this pricey, scarce real estate.
But senior living is emerging as a more attractive option for urban development as other property types, including traditional multifamily, have become less lucrative.
“We’ve done multifamily, too,” Seneker observed. “From our perspective, the spreads are way too thin to justify taking development risk. As a result, we’ve started to see more and more loosening of entitled sites or maybe just sites being tied up by multifamily developers.”
Furthermore, existing urban senior living products are mostly entrance-fee continuing care retirement communities, meaning there is space for a pure rental model, he believes. The Murano is advertising monthly independent living rates starting at $4,950, with assisted living having the same baseline rate plus care services starting at $2,100. Memory care monthly rates start at $10,000.
These prices are not cheap, but Murano residents are not required to put down a hefty entrance fee, which can commonly run into six figures, Seneker noted.
And, other urban product is similarly priced — with significantly higher numbers proposed for senior living in Manhattan. The coming years will show how sustainable these rents are, but demographic projections show that there will be a growing number of older adults seeking urban housing options, despite some debate about how much city living appeals to aging boomers.
While he anticipates that affluent seniors will be attracted to the greater flexibility of the rental model, Seneker noted that this is a relatively new product type and Murano will be a proving ground for it.
“It’s Leisure Care’s job as the operator and our job as the owner to build a lifestyle that [residents] want,” he said.
At Murano, that lifestyle includes personalized concierge services; robust health and wellness offerings; a variety of dining options, including a rooftop deck; a golf simulator and game room; and a variety of cultural institutions within walking distance.
Updating a classic independent living model
Columbia Pacific acquired the Hawthorn portfolio from owners Norm Brendan, Pat Kennedy and brothers Bart and Brad Colson. The Colsons’ father, Bill Colson, founded independent living giant Holiday Retirement. In certain key respects, Hawthorn replicates the Holiday model, Seneker explained.
Most notably, Hawthorn communities are managed by couples who live on site. This was the longstanding Holiday management approach, which was only recently phased out under current ownership group Fortress (NYSE: FIG).
“It’s the next version of the [Holiday] prototype,” Seneker said. “There are some more amenities that are attached. They tend to be a little bit larger, maybe 140 to 150 units, whereas before they were 120.”
Even with additional amenities, Hawthorn properties are relatively low-frill and geared toward a middle-market consumer. Lower rental rates are made possible in large part by the fact that Hawthorn is an integrated development, construction and operating company, Seneker said. Columbia Pacific acquired the development and construction arms along with the operating company.
“We’re able to control costs and actually find the right locations and have really long-term relationships with subcontractors, and we’re able to deliver product at a reasonable basis,” he said. “Historically, we’re able to go into markets at relative discounts to other assets.”
There is a huge cohort of aging, middle-income boomers who will not be able to afford senior housing at today’s prevailing market rates, according to a study released last year. Columbia Pacific is scaling to meet this demand, planning four to six new Hawthorn developments per year.
While lower real estate costs make secondary and tertiary markets attractive locations for middle-market products, Columbia Pacific is not ignoring major metros. City centers may be too pricey, but dense suburbs near metros such as Boston, Philadelphia and even Manhattan are attractive locations for Hawthorn projects, Seneker said.
Occupancy in the Hawthorn portfolio has held up over the last several years, as oversupply pressures were mainly concentrated in assisted living, according to Seneker. Going forward, he is keeping an eye on active adult activity. He does not view active adult as a major competitor to Hawthorn, but anticipates that some consumer education will be called for to explain the differences between independent living and age-restricted apartments.
For instance, Hawthorn units do not have full kitchens in living units but — unlike most active adult buildings — they offer dining out of commercial kitchens on site, viewing this as a key way to create a social environment. This increased socialization should be selling point for IL, in Seneker’s view.
“You have to do a good job of explaining what the differences are, and what’s the value of $300 a month higher [rate],” he said.
In the Hawthorn product but also high-end projects like Murano, Columbia Pacific is facing the same big challenge that the senior living industry as a whole is grappling with, when it comes to attracting the next generation of residents.
“Who is the customer that’s going to show?” Seneker said. “Is it somebody in their 80s, that maybe something happened that drove them to this type of solution? Or are we able to deliver a very hospitality-like environment, that when you walk in, it doesn’t feel like ‘retirement’?”