Opened in Oct. 2020, NorthStar Georgetown is the first active adult community for developer Chalk Hill Ventures — and it will not be the last.
“I think there’s a lot more room to run than maybe people realize,” Chalk Hill Founder and President Langford Stuber told Senior Housing News, referring to active adult rental communities.
Chalk Hill’s strategy is to develop conventional multifamily and active adult communities in Texas, with a particular focus on the Dallas/Fort Worth market and the Austin-San Antonio corridor. Currently, the firm has about five projects in the pipeline, including a mixed-use development that will include both active adult and multifamily.
The active adult rental market is still in its early stages, meaning there are plentiful opportunities for first movers like Chalk Hill, Stuber believes. And he sees obstacles to active adult development — notably difficulty in obtaining capital — receding as investors and banks learn more about the product.
Filling a niche
Stuber began his career in electrical engineering before switching to the capital side of real estate, including doing a five-year stint with Bank of the Ozarks. His goal was to become a developer by leveraging his past experiences — “on the ground, wearing a hard hat, and then working on the financing of projects and really understanding how to put a deal together.”
The specific focus on active adult came about somewhat through happenstance. Mark Walker — a family friend, whose father founded Walker Engineering — had been involved in one of the first active adult rental projects in Texas, built outside of Houston in 2015. That project was so successful, Walker began seeking out further opportunities and turned to Stuber for help.
“I had no intention, at that point, starting my own shop and co-developing a project with him,” Stuber said.
But, they looked at about a dozen sites and ultimately determined that Georgetown, with one of the largest concentrations of retirees in the nation, was the right location. In 2019, Stuber formed Chalk Hill Ventures and brought on board Justin Walker, another Bank of the Ozarks alum.
Needless to say, Stuber did not anticipate a global pandemic when planning the Georgetown active adult project and founding Chalk Hill.
“When Covid hit and we were mid-construction, we thought, oh no, what are we going to do?” he said.
The pandemic curtailed the high-touch marketing strategy, which called for interfacing closely with local institutions such as local churches. And, Stuber feared that the pandemic would make older adults view communal living less favorably.
Lease-up was difficult at first but quickly gained steam. The project started the year at 4% occupancy but was 37% leased as of late May, right on pro forma and exceeding expectations from a lease-up velocity standpoint, Stuber said. Excluding February — when severe winter storms hit Texas — the project has leased 12 units or more every month this year.
“The residents are raring to go … they are gung-ho about creating a sense of community, even more than we imagined,” Stuber said.
That enthusiasm is crucial to the vision for NorthStar Georgetown. The project encompasses almost 12 acres and 210 units, which is significantly larger than the 4 to 6 acres of the competitive set, according to Stuber.
“Our outdoor programmable space is substantially larger than most of the competitors, where we’ve got four unique outdoor individual courtyards, two dog parks, multiple pickleball courts. So we feel like we offer a lot more of a variety of amenities,” he said.
Currently, Fitcasa Lifestyle Management Group is programming the community, with about 25 programs a month. Those range from wine tastings to various off-site excursions. But the goal is eventually to empower residents to take charge of programming, creating and running clubs and activities.
“The idea is to let residents take ownership and let them feel like not just an apartment complex but a community,” Stuber said.
A multifamily approach
As recently as 10 years ago, there were few rental active adult communities, but that has changed.
Multifamily giant Greystar has been on the leading edge of active adult, creating a large portfolio of communities across the United States. In Texas, companies such as Sparrow Partners also have been active, Stuber said.
Still, developers and operators are learning more about the formula for success, and pitfalls to avoid, with each project. Having observed the market over the last decade, Stuber believes that active adult rental communities fill an important niche between typical multifamily apartments and higher-acuity senior housing such as independent living and assisted living.
But, he thinks that active adult is more similar to a multifamily play.
“You kept seeing all this happen, where people that were coming into the market were focused on it as a segment of AL/IL, and in our minds, it wasn’t,” he said. “… So we really took the approach of, let’s build this as a conventional multifamily project, but program it and design it to be more accessible and appropriate for this demographic.”
The similarity with multifamily extends to rental rates as well, with NorthStar Georgetown running to about $1.80 to $1.85 a square foot. But, the income stream should be more resilient than a standard apartment building, given that the residents are on a fixed income with a longer average length of stay.
He thinks that investors and lenders also have come to see active adult as more akin to multifamily.
“You used to see probably a 150 basis point spread between a conventional multifamily trade and an active adult trade — that spread has come down to 50 basis points or less now, as the capital markets start to understand that this is not an operationally intensive business,” he said.
With capital easier to access, the “biggest limiting factor” in expanding active adult has eased, in his opinion. This is paving the way for further growth of the product type as the demographic wave of aging baby boomers is set to increase demand — and Stuber is ready to seize opportunities, while maintaining a disciplined approach on when to develop conventional multifamily versus active adult.
“If the site and location, the demographics, lean toward an active adult project, then that’s what we’ll pursue,” he said.
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