Senior Living
Co-Development/Lead Developer

We often work in a co-development capacity, typically as the lead developer before identifying a co-developer. Typically, we identify a viable property in a compelling major market and then conduct substantial due diligence and negotiations with the owners to obtain some level of site control before proceeding to identify a co-development partner. The exception to this is when the Co-Development Partner is an Owner or Developer who introduces the Subject Property to us.

Sites are sometimes introduced to us; however, the majority of the time, as Lead Developer, we identify high-barrier-to-entry sites in compelling markets to reduce risks of smaller markets, limiting new competition and otherwise. We evaluate a market first, and then if it is compelling and then find an appropriate site if available. As an example, we targeted 30 communities in Broward and Palm Beach counties starting in early 2024, proceeding with purchase/entitlement for a compelling 200-unit Independent Living, Assisted Living and Memory Care combined project.

It is critically important to approach the processes of due diligence in the appropriate order and manner. This process should start with a high-quality market analysis that goes way beyond demand alone and includes physically mystery shopping the competitors. This not only provides a much clearer picture of occupancy rates but also helps to understand the unit mix, unit sizes, and the amenities and common areas of competitors. We must conduct physical mystery shopping personally to avoid the “Starting as” approach to marketing, where the same unit might start at $4,200 per month but, depending on the location in the building (e.g., a first-floor unit with a patio or a unit with certain views), the rent can range from $4,200 to $5,600, as was the case with one Independent Living project our CEO visited in the last few years.

Armed with the market analysis that includes a physical plant review of all key competitors, and based on our experience in development, we are well-positioned to develop a viable development and plan. This plan will detail the appropriate unit size and mix and provide an itemized breakdown of every common area amenity and other usable spaces in a proposed design. This will give clear instructions to an architect based on a thorough first-hand review of the competition. Only after this added process can we complete proformas and forecasting, develop an appropriate valuation, and complete a business plan.

As Tim, our CEO, has to remind so many landowners, dirt has one value, while entitled sites where industry-specific developers take risks, incur costs, and often rezone properties have a much higher value. Our Development Partner(s) invests a predetermined entitlement budget in phases. Phase I includes obtaining use or zoning approval, if not already in hand, before proceeding to Phase II, which involves obtaining Final Site Plan Approval as well as full design to builder permits if our development partner is a worthy sponsor to own a to-be-completed project.

We are developers and not sponsors/guarantors, and typically sell the fully entitled site for a profit or may remain as a limited partner. Nonetheless, at Closing, we are paid a predetermined fee(s). Understanding most projects range from $60-90M in total costs, our fee is somewhat lower than what is usually expected by lenders and investors in the Senior Housing industry, and part of the appraisal for a fully entitled site in the market.

Reach out to [email protected] for more information.