Former Anthology Senior Living President Ben Burke is turning his focus to middle-market active adult communities with the launch of a new senior living company.
Burke is now managing partner of Headwaters Group, a Denver-based owner, operator, manager, and developer of active adult communities. Though the company is new, it’s kicking off in a big way with a pipeline “approaching 10 deals” in Colorado and Arizona, with its first projects getting underway in late 2022 and early 2023 according to Burke.
“We are going to be an owner, operator, developer and acquirer of active adult communities in the western half of the United States,” Burke told Senior Housing News. “For now, we will only play in the active adult space.”
Burke and the new company have partnered with a to-be-revealed institutional capital partner on a programmatic joint venture to develop and acquire active adult communities.
Joining Burke is a “small but very strong and experienced team” that includes Senior Vice President of Operations and Finance Chris Ducay, who is a former vice president of operations, finance and transitions with Sage Hospitality Group; and Jeff Hoffman, who took the role of Headwaters’ senior vice president of development after working under the same title at BMC Investments and spending time at Trammell Crow Residential.
The company’s director of investments, Lauren Napheys, also hails from KPMG, where she worked on the M&A deal advisory team, according to Burke.
“We are fully stood up,” he said. “We have all of our capital raised, and we are building our pipeline.”
Though he is leading the new company, Burke has not fully stepped away from Anthology Senior Living, which is an affiliate of Chicago-based real estate developer CA Ventures. He’s no longer involved in the day-to-day management of the business, but he is still a senior advisor to the company, he said.
Pipeline takes shape
In its initial push, Headwaters is going to focus mostly on new development, and only in its backyard of Colorado and in Arizona before pushing westward. The company is targeting suburban markets with a large density of older adults.
Headwaters’ goal is to operate and develop in markets where many kinds of people of all ages live and work, and where people have established deep roots and family ties.
“We are being very thoughtful on our market and submarket selection, not getting out over our skis on growth, and quite frankly, building out in our backyard before we spread our wings further,” Burke said.
The company’s communities will cater to the upper-middle-class segment of the middle-income cohort, with expected monthly rates between the higher end of $1,900 to a little more than $2,000.
“We want our active adult [communities] to only be priced at a slight premium to traditional multifamily, but at a deep discount to independent living,” Burke said.
Burke acknowledged that senior living development is still not for the faint of heart with construction material and labor costs still sky-high. He is also seeing certain markets — including Headwaters’ target of Phoenix — heating up with regard to new development.
Still, “in the active adult world, generally, there’s been a dearth of product and so we’re not seeing it much,” he added.
Burke also noted that there are other companies vying for the same middle-market resident demographic, and that the prospect of many similar communities leasing up in the same market was a “potentially scary scenario.”
But to Burke and the team at Headwaters, the potential benefits outweigh the risks.
For one, senior housing leases are relatively short-term compared with other asset classes, giving active adult operators the ability to “reset revenue in an inflationary environment faster than other real estate asset classes, which allows us to pair our revenue with rising costs,” Burke said.
He also noted that the average age of many senior housing communities is between 15 and 20 years old, which should be a boon for a company looking to open brand-new communities in the coming years.
“New beats old in our space, and people like the shiny penny,” Burke said.
In addition to undertaking development, Headwaters is also actively bidding on potential acquisitions. Currently, Burke is seeing mostly stabilized communities on the market, which are trading at “prices that are higher than we would pay for them.”
“We would be looking for more opportunistic acquisitions, whether that be completing a lease up, adding units or potentially putting in institutional management practices,” he said.
Headwaters is also considering some adaptive reuse, “but we have not fully fleshed out that thesis,” Burke added.
In addition to building its portfolio, Headwaters is also building its company culture and brand. The company is also taking stock of the active adult space and all of its players in order to stand out with prospects, Burke said.
‘Heart of the demographic’
One of the biggest appeals for active adult developers is that the product type caters to a slightly younger demographic of older adults who make up the bulk of the incoming baby boomer demand wave.
Indeed, that is a major part of why Headwaters was founded, according to Burke.
“What I’m really excited about is the ability to reach further down into the heart of the demographic that’s coming our way,” he said. “They’re going to be in the senior living industry for the next 40 years, and if we can be the folks that learn the most about them … we think that will really serve us well.”
It is no secret that the industry faces a challenge in catering to the baby boomers, and Burke said it can be a challenge to both keep customer preferences in mind while also navigating the Covid-19 pandemic and all of its pressures.
But Burke — a senior living Changemaker who is breaking new ground in creating high-quality communities at a more attainable price point — also has a wealth of industry experience and knowledge of what drives value for older adults.
He comes to the active adult segment after spending almost seven years as president of Anthology Senior Living, where he has developed innovative strategies that have paid off for the company.
Burke and the team at Headwaters are jumping into an active adult sector that has seen increasing investor interest in recent years, with recent surveys from CBRE and JLL identifying the product type as a top investment target.
Headwaters is also not alone in being a new player in the middle-market active adult sector, with other recent entrants including real estate developer and investor Middle Street Partners, which is making its first foray into the middle-market active adult market with an industry veteran from Greystar heading up its plans; and Avenue Development, which is launching a new active adult company centered on middle-market rates and access to preventive care for residents.
Still, despite a market segment that is becoming increasingly crowded over time, Burke believes there is enough demand to go around.
“If folks can make the economics work, they should be able to lease up their projects with good operations,” he said.