The Next Wave

From SoCal Real Estate’s January 2019 issue:

How the Silver Tsunami will impact SoCal real estate

By Carrie Rossenfeld

“Senior housing will be the next hot real estate market.” So says Douglas Wilson, chairman and CEO of Douglas Wilson Companies (DWC), which has become a major developer of senior-housing facilities in the San Diego market.

Reflecting its recognition of the Silver Tsunami — the large wave of baby boomers becoming seniors — the firm recently launched its first ground-up project, Sienna at Otay Ranch, the first of a portfolio of such properties planned in the Western region, according to a representative of the firm. Located at 1290 Santa Rosa Drive in the Otay Ranch neighborhood of Chula Vista, the project is an up-market senior-housing brand whose first residents began moving in in October 2018, with an official grand opening in November 2018.

The $31 million, 110,000 square-foot Sienna at Otay Ranch offers a total of 111 units with 127 beds: 85 apartments for assisted living and 26 for memory care. Just like in other sectors of CRE, high-end amenities are critical to today’s senior-housing facilities, so the complex will offer a 7 a.m. to 7 p.m. full-service, white-tablecloth restaurant; outdoor dining; community garden; courtyards; bistro; juice bar; library; fitness area; reading and game rooms; movie theater; beauty salon and barbershop; and a regularly scheduled onsite nurse practitioner. Milestone Retirement Communities will handle all management responsibilities for project.

Two other senior-housing properties for DWC’s senior-housing were in final negotiations as of late October. According to the representative, Sienna at Otay Ranch is just the first in a series of long-term senior-property holds for DWC, which has announced its intention to build five to eight of these up-market senior communities over the next five years and grow the brand into the future. The company’s whose current business platforms include a strategic focus on the needs and opportunities associated with the demographics of America’s aging population.

“With our new brand of senior properties — as well as our new Legacy Assets Management division —Douglas Wilson Companies is dealing head-on with the needs and aspirations of the country’s aging population,” Wilson says. “We call it the Silver Tsunami for the simple fact that by 2035, older adults will outnumber kids for the first time in U.S. history.”

The move to senior housing is a departure for Wilson, but he is no stranger to shapeshifting. In the 1980s, Wilson created the 35-story Symphony Towers, a renovation of San Diego’s symphony hall within the walls of a mega-commercial and hotel complex, which takes up a full city block in Downtown San Diego and remains an icon to this submarket. Two other Wilson icons — The Mark and Park Loft — have also made their mark Downtown. The two condominium buildings have complemented San Diego’s recently built ballpark Petco Park, which has revitalized the east side of town. And, when the Great Recession hit, Wilson turned to handling workouts nationwide, transforming his company into one of the country’s most prominent receivers, trusted by private investors, banks, and government to reposition or sell troubled assets.

According to the rep, Wilson and his team are now gearing up for what they see an imminent, unprecedented transition of wealth valued at nearly $60 trillion from the baby-boomer generation to its adult children. He is quoted in a profile as saying, “Inevitably, and unfortunately, such a major shift of accumulated wealth will create a variety of disputes concerning ownership, control, management and disposition of assets. Our goal is to help our clients avoid the pitfalls of such disputes, maximize the value of their assets, and stay out of court.”

Regarding this focus on seniors, Wilson says, “Given the country’s aging demographic, we are very committed to the senior housing business for the foreseeable future and plan to build multiple individual communities.”

According to the profile, complementing its development and asset-management practices, DWC continues to offer real estate advisory services, working with large private, public and non-profit institutions. Through these services, DWC evaluates and retools existing land and business plans to help clients maximize opportunities in today’s marketplace.

“We have been working behind-the-scenes to help some large land owners rethink their future opportunities,” Wilson is quoted as saying. “These large master-planning ventures allow us to tie together the collective strengths of our company.”

Wilson tells SoCal Real Estate that the Silver Tsunami will hit higher-end demographics, which means a greater impact to Southern California, where real estate has long been a wealth-generating economic engine. “Because of values, there’s a larger preponderance of wealth in Southern California created through real estate than has been experienced in other parts of the country.”

Two parts of Southern California will be hit the hardest, he says: the urban centers (Los Angeles, San Diego, and Orange County) as well as rural areas that have large, multi-generation agricultural holdings.

The senior population will go through changes in this market. Wilson says, “In the short term (over the next year), it’s really a snowball effect: as every day progresses, more and more people are aging out. From year to year, we will experience a built-up backlog, an aging population that will have to deal with a number of issues particular to their stage of life, including housing and overall lifestyle issues.”

Meanwhile, developers should be looking at both the changing lifestyle (people are living longer and are much more active than ever) and a full spectrum of housing stock to meet the needs of seniors in various stages of their lives, Wilson says. “Savvy developers realize that we are way behind the power curve; this doesn’t really reach its peak for another 10 years or so, and it’s difficult to fast-track this type of housing.”

There are many private and institutional lenders and investors that are well aware of the need for this type of housing, and if they aren’t invested in this class, they’re starting to look at it seriously, Wilson notes.

Part of the reason for this is how senior-housing properties have changed over the decades. “Today’s facilities don’t look anything like what was built 30 years ago and don’t carry the stigma that accompanies older properties,” Wilson says. “What we’re building now is a direct reflection of what the market is demanding. Today’s ‘seniors’ are more active, more independent, so their housing reflects that individuality. They want lots of amenities and conveniences (coffee shops, on-site medical care, gardens, etc.).

Because DWC believes the future is in age-restricted independent living, the firm is planning variations to the “main building” concept. “This means stand-alone, duplex units or one-story casitas that offer full access to the main building,” Wilson says. “And we’re designing separate wings that allow independent units to be converted to assisted-living units to promote aging in place.”

The Silver Tsunami will usher in one of the most significant economic changes in the history of our country, yet people are only now starting to focus on it, Wilson adds. “It’s a vortex of people living longer, combined with the decisions they must make about their amassed wealth that has appreciated over longer period of times. We’re all surrounded by it, but very few people have taken the time to understand. But if you reflect upon it, it impacts each of us.”