Caddis Partners LLC, a Dallas-based healthcare real estate developer, recently launched its own senior living brand with plans to deploy about $100 million into new development in 2013.
“The reason we started doing [senior housing] is that it was a natural progression from medical office buildings (MOBs) and hospitals,” says Jason Signor, partner and CEO at Caddis Partners, adding that his firm will stick to need-based product types. “It’s a new sector for us, but it’s pretty familiar.”
The firm “dabbled” in the senior living industry starting in 2010, according to Signor, and has taken a methodical approach to learning the business and gauging demand. In mid-June, Caddis Partners announced plans for significant senior housing development under the Heartis brand, a play on the saying “Home is where the heart is.”
“We purposely decided to create our own brand because we’re trying to find something a little more upbeat, and a lot of brands in the market have more of a dated feel to them,” Signor says. “We’re trying to go for something a little fresher, that’s not just providing a supportive, caring environment for residents but that is also active and stimulating.”
Last year, Caddis Partners sold eight MOBs to Griffin-American Healthcare REIT II and American Realty Capital Healthcare Trust for approximately $100 million, most of which is getting redeployed to senior housing development, says Signor. The firm has about 20 MOBs remaining in its portfolio.
Caddis Partners will continue to develop and acquire medical office buildings, but senior housing will account for about 60-70% of the firm’s expected $150 million of development in 2013. That will be about the same in 2014 as well, according to Signor.
The plan is to develop 15 to 20 communities in the next three years—mostly assisted living with memory care comprising roughly a third of units—scattered throughout the southwest.
Caddis opened its first senior living community in September 2012, and expects to open a standalone, 50-bed memory care community this summer in Texas. Two more are in the works in the Dallas-Fort Worth area, three more are scheduled to break ground in the next three months, and the firm expects to close on four to five other sites in the near future.
The first project that being developed under the new brand is Heartis Cleburne, a 96-bed assisted living and memory care community in Cleburne, Texas, near Fort Worth. The 61,125-square-foot community will have 61 beds in 54 assisted living units and a dedicated 35-bed memory care unit.
Katus, an Austin, Texas-based architectural firm, is providing design services for the project, with financing coming from Houston-based Amegy Bank.
While there are no current plans to get REIT or private equity backing, Signor didn’t rule it out.
“The future has yet to unfold,” he says. “We haven’t done it yet; everything we’ve done is with our own funds.”
Because of its strong background in hospital and medical office building development, Caddis Partners hasn’t had any trouble getting financing from regional banks, the firm’s “primary driver” for debt. Throughout the Great Recession, the firm was averaging anywhere from $60-80 million a year in development, according to Signor.
“We’ve found that when you can take a new loan in 2009 and pay it off in 2011 or 2012, banks look highly on that,” he says. “We’ve had no issues with debt—we’ve been able to get it at cheaper prices and with better terms than our competitors.”
The Heartis communities will be owned and managed in a joint venture with Eugene, Ore.-based Good Neighbor Care, which has been looking to expand its southwest operations. Caddis Partners, the primary supplier of capital for the projects, will be the majority owner.
“Anyone can create a brand, but we’re trying to distinguish that brand with the quality of service we provide,” Signor says. “We’re working with Good Neighbor to accentuate that.”
Written by Alyssa Gerace