Arbor Oaks at Crestview
Two-phase redevelopment approach aids in financing, results in phenomenal marketing response.
Sponsor: Methodist Retirement Communities, Inc.
Assisted Living Phase I: 48
Memory Support Phase I: 18
Skilled Nursing Phase I: 48
Independent Living Phase II: 92
Opening Date Phase I: 2011
Opening Date Phase II: 2013
Crestview Retirement Community opened its doors in Bryan, TX, in 1964. Over the years, Crestview and its parent organization, Methodist Retirement Communities (MRC), have fostered a reputation for quality care as a valued neighbor and community member.
Why Was Change Needed?
While Crestview’s occupancy remained high, its physical plant began to suffer from deferred maintenance, and was no longer consistent with current senior expectations or in full compliance with changing state regulations. MRC recognized that in order for Crestview to remain financially viable and competitive within the market, a significant repositioning was necessary.
The Redevelopment Team
In 2008, MRC’s board of directors determined that for the organization to continue to serve its mission, it needed new management and a new strategic direction. The new management team reorganized the central office and set forth a strategic plan that required investment in performing communities and the disposition of non-performing assets. This new management team quickly realized that Crestview could become the lynchpin for the future direction of MRC, but several failed redevelopment attempts by prior management had limited the available development capital and resulted in a market that was skeptical of the next redevelopment announcement. The new management team recognized the value of choosing a team of professionals who could assist them in realizing their vision.
Greystone Communities was selected as development consultant for its fully integrated multi-disciplinary team, knowledge-based experience in non-profit CCRC development, and resources to execute complex projects in a timely manner. Ziegler Capital Markets Group was selected as the underwriter, Perkins+Will as architect, and Weis Builders as the general contractor.
Description of the Project
Working with Greystone, MRC defined a repositioning plan for Crestview that met the expectations and demands of the board, as well as addressed the capital constraints. Crestview would be repositioned as a lifecare, entrance fee-based continuing care retirement community through a phased repositioning.
The first phase of the repositioning would result in building a replacement health center, adjacent to the existing community, and diversifying their services by adding a new level of care — memory support assisted living — to Crestview. The second phase would result in the demolition of the current health center and the construction of the new independent living apartments.
The phased approach allowed Crestview to continue serving its residents and retain valued staff members, who were integral to the continued strong reputation of the community, while simultaneously reducing start-up losses during fill-up. Further, by financing the project in two stages, the total amount of pre-finance capital necessary at any one time was significantly lower than if the entire project were financed and constructed all at once.
Challenges and Results
Concurrent with the financing and construction of the new health center, MRC and Greystone began marketing the new entrance fee independent living apartments that make up the second phase. By marketing these units during construction, Phase II could be financed as soon as the new health center was licensed and operational. The market response was overwhelming. All 92 independent living apartments were pre-sold in 11 weeks. Local seniors are drawn to Crestview not only for the program of service, new residences and lifecare, but also because it has been a trusted neighbor for nearly 50 years.
Keys to Success
The repositioning of Crestview was a system-wide effort. To secure the capital to fund pre-finance expenditures prior to the financing of the health center, MRC was able to secure a bank loan from a local bank. Further, MRC contributed the capital necessary to fund the liquidity support agreement. All the while, MRC continues a capital campaign to help offset the pre-finance costs associated with the marketing and design of the independent living apartments.
By repositioning Crestview, MRC is moving the community’s operating model away from being the value leader in the market and limiting its exposure to Medicaid. Not only is this positioning Crestview to continue to be the quality care provider of choice for the next 50 years, but it is also an instrumental factor in implementing the new management team’s strategic direction to propel MRC into the future.