Senior living developer and operator Build Senior Living is executing through the increased pressure of developing in uncertain economic conditions with a slew of projects underway or planned.
Build’s current development pipeline includes scheduled groundbreakings in Texas, Missouri and Michigan later this year, with ongoing construction also in those states. The company has achieved that despite economic conditions that have become somewhat prohibitive to new development and construction.
“In the last six months, development has been very challenging, especially with interest rates very high,” Build Managing Director and CEO Shahid Imran told Senior Housing News. “But the good thing is that the cost of materials is coming down.”
Still, lenders are tightening their strings for new construction development, according to Imran.
Build, which operates communities under the Hampton Manor Assisted Living and Memory Care brands, has a pipeline and portfolio that includes 38 assisted living and memory care communities. in Florida, Texas, Missouri, Illinois, Virginia and Michigan.
In building its portfolio, Build has carved out a footprint where its leaders see the most demand.
“I think everybody loves better weather, right?” Imran said. “I see people go to warmer areas for a certain period of time, but when they are ready to make their departure – the last 18 months of their life, they tend to come to where they are from.”
He pointed out that different markets bring different dynamics. For example, Hampton Manor charges higher monthly rates on average in Michigan than it does in Florida, in part because Florida is more saturated with assisted living and memory care supply than Michigan is, according to Imarn.
Imran and his colleagues launched Hampton Manor in 2013 with the aim of fostering independence among older adults and “spoil[ing] the generation who spoiled us.” He believes the operator has crafted a culture that reflects that goal.
“One of my residents asked if I was the owner and also asked if we can build one in Dallas because her friend lives there,” he said. “So we have created that culture.”
Still, increased operating costs have taken their toll on Hampton Manor in the past year. So, like many in the industry, Hampton Manor raised rates this year by about 5% to 8% depending on the median income of the market.
“The only way you can recover your margin is to increase the rates and get your occupancy higher,” said Imran.
Development costs aren’t the only part of senior living getting more expensive for developers and operators – labor continues to weigh on the bottom line.
“We were paying our employees $14 per hour – now it’s $17 per hour,” Imran said. But like the cost of construction supplies, the labor market has gotten a bit better in recent months.
“It’s getting better,” Imran said. “They’re applying and we’re getting them in the building.”