Alliance Residential is developing new senior living communities amid rising investor interest and improving operating conditions.
Alliance last month revealed plans for a $3 billion senior living development pipeline to grow the company’s Holden senior living platform over the next three years. In the previous construction cycle, Alliance developed communities worth about $2 billion total in sectors including active adult, independent living, assisted living and memory care, built in coastal markets including Southern California, San Francisco, Portland, Seattle, Arizona and Southern Florida.
Alliance Residential leaders are embarking on a new growth push with sights set to start senior living development in 2027 and 2028 and stabilize in the following five years, CEO V. Jay Hiemenz told Senior Housing News. Thoughtful amenities, lifestyle and healthcare services in a “bespoke” manner where each community fits the market, are critical to making Alliance’s projects work.
Future projects could range from 100 to 200 units, and the company’s leaders are staying away from “much bigger projects” with an emphasis on active adult, independent living and assisted living and memory care properties, Hiemenz said. In the next development push, Hiemenz told SHN the company is now targeting “a number of markets” in the Sun Belt, Midwest and Mid-Atlantic alongside markets the company built in previously.
This comes after Alliance “restarted” its senior living development strategy, and the company has letters of intent or is under contract at six sites currently seeking entitlements. Alongside that initial pre-development work, Alliance is “actively negotiating” land acquisition contracts in Atlanta; Austin, Texas; Boise, Idaho; Charlotte, North Carolina; Dallas; Fort Worth, Texas; Denver; Houston; Kansas City, Missouri; Nashville, Tennessee; Orlando, Florida; Phoenix; Seattle and Tampa, Florida, as well as in regions of Northern Virginia and Southern California.
“We believe a fairly wide band of markets have opportunities in senior housing given the lack of supply in the last several years,” Hiemenz said.
Starting this pre-development work now is important for Alliance, given that the average time it takes to build new senior living communities is now stretched to 29 months, according to NIC MAP data. Starting now helps prepare a smooth flow of projects as new investors and longstanding capital providers continue to open up their coffers, Hiemenz said.
While it is difficult to develop now, conditions appear to be thawing as acquisition prices rise. At the same time, building new allows providers and their development partners to create curated amenities and services that can attract new senior living residents more easily than older existing properties, Hiemenz said.
“The short answer is because capital and investors have returned to the segment in a big way, and we’re seeing the fundamentals improve and acquisition prices are increasing,” Hiemenz added. “The why now is really a function of strategy relative to the cycle and capital returning.”
After learning lessons in the previous development phase, Hiemenz said the Alliance team is taking its experience and using it to identify stronger opportunities outside of coastal markets, something that he said could mirror the demographic demand for senior living across the country.
To thread the needle as interest rates, construction costs and financing remain elevated, Hiemenz said Alliance would be “very thoughtful” in the company’s gambit on the latest proverbial senior living development gameboard. The key to developing properties successfully starts with market research, due diligence and an understanding of where demographic trends are headed within a region, state or municipality, Hiemenz said.
“With Alliance’s broad footprint, we can draw on our offices’ experience to enter markets where we haven’t built before with an informed strategy,” Hiemenz said.
Starting now and not rushing back are important factors guiding Alliance’s approach to restarting its senior living development pipeline as projects take longer to build and require 12 to 24 months before reaching stabilized performance, Hiemenz noted.
“We’re looking at the demand curve coming from demographic trends, current occupancy and supply and the number of units expected to come to market over the next couple of years,” Hiemenz said.
Another critical piece to making new senior living developments successful is finding the right operating partners to manage the communities once they are open. Alliance maintains relationships with Allegro Senior Living, The Arbor Company, Oakmont Senior Living and Watermark Retirement Communities, as the company prepares to add three additional operators to its dance card amid contract negotiations.
A uniting factor in these operator partnerships is an emphasis on regional senior living property management with operators familiar with market conditions and regulations within a given region, rather than working with a broad, nationally based senior living provider.
“We look for operators with strong reputations, the capacity to take on a lease-up and experience with the pre-leasing and marketing involved in opening a new building,” Hiemenz said. “We also want partners who are aligned with us and underwrite the projects alongside us.”
