Seniors housing construction has continued during the COVID-19 pandemic — but perhaps not on the developers’ original timelines.
“We have seen just about every obstacle thrown at us, from government shutdowns to disruptions in the supply chain to subcontractors contracting COVID to inspectors not showing up,” said Charlie Jennings, chief development officer, Harbor Retirement Associates. “Every time I start to think the worst is behind us, there’s something waiting around the corner. Unfortunately, I don’t think we’ve gotten past that hump yet.”
Harbor’s current seniors project under construction is now scheduled for completion about six months late due to COVID-19 complications, Jennings added.
The comments came during a panel titled “The Development Outlook: Experts Analyze The Smartest Plays For Developers in 2021” during France Media’s InterFace Seniors Housing Investment, Development & Operations conference, held virtually in early December. Other panelists included Bryan Schachter, chief investment officer, Watermark Retirement Communities; Frank Muraca, president and senior planner, ARCH Consultants; Adam Kaplan, founder and CEO, Solera Senior Living; Chuck Hastings, vice president of finance and business development, Juniper Communities; and moderator Ryan Frederick, founder and CEO, SmartLiving 360.
Schachter said that Watermark has seen development delays of four to six months for its four seniors housing development projects that were underway when COVID arrived in the United States. “It has been an uphill battle,” he said. “It’s not like it’s stopped us from moving forward, but it made projects more challenging.”
Hastings said Juniper completely froze one of its projects in its tracks due to the pandemic. The development is located in a college town that saw a large spike in infections, plus a competitor that just opened.
“We put the entire thing on ice. It’s not the right time,” said Hastings. “We have to wait until the competitor fills a bit more. They’re cutting price, we’re cutting price. It’s really unfortunate, but we can wait until the summer to reevaluate it and see where we are.”
Frederick noted that these significant delays were for projects that were already under construction. Those still in the planning phase seem to still be on track for delivery timelines. “There are two buckets — developments that are in process, and those that haven’t necessarily been financed yet.”
Schachter agreed, noting that projects that haven’t yet entered the construction phase are seeing fewer delays, but those projects are more likely to hit snags when it comes to raising capital and receiving loans.
“It’s really the financing side of things that is the big question mark now – getting capital partners to really commit at this point in time when we have some pretty heavy pre-development costs that we have to get comfortable with,” said Schachter. “We’d like more clarity and they’d like more time.”
“Investment decisions will be affected depending on where you are in the development process and where you are in the country,” added Muraca. “Deals approaching construction finance are certainly pivoting these days.”
Kaplan noted that there was a silver lining to COVID delays, though. Solera took this extra time to “go back to the drawing board, look at design and make sure that we’re properly positioned” for post-pandemic sales, he said.
For example, the company changed one of its technology vendors to one with a more robust solution for live-streaming classes, telemedicine and video calls between residents and their families.
“The area we’ve focused the most on is technology,” said Kaplan. “We’ve made some pivots to implement some technology that would better position us for the future.”
— Jeff Shaw