By Burl Gilyard
Dolan Media Newswires
Minneapolis — Senior housing projects have been a relatively stable pocket of development, even during the recent shaky economic times. But like many other commercial ventures, senior housing projects often face a tight financing market.
Now, some senior housing developers say they see signs the financing logjam is breaking up.
“Many projects got significantly hurt by the financing market,” said Patricia McCullough, a principal with Edina-based Health Planning & Management Resources Inc.
But McCullough said that after seeing a nose dive in feasibility study work, her firm is experiencing an uptick in that business.
“I think that the market is settling down some, there’s some overall optimism with people and I think that the lenders are beginning to look at some projects again with more reasonable interest rates attached to them,” McCullough said.
John Mehrkens, vice president for development with Roseville-based Senior Housing Partners, the development arm of Presbyterian Homes and Services, echoes the sentiment.
“We’re starting to see signs of life again in the finance world again. We’ve got four projects that we think are going to start construction that our organization is involved in.”
Financing has not been finalized for any of the projects, but Mehrkens said he is optimistic based on feedback from prospective lenders.
The projects include two Presbyterian Homes projects in the Twin Cities area — a $17 million replacement of an assisted living project in Spring Park and the $60 million Carondelet Village in St. Paul — and two outstate projects for third parties. Originally, company officials had wanted to start Carondelet Village last fall.
Presbyterian Homes has large scale, mixed-use projects in the pipeline in Wayzata and Eden Prairie. Mehrkens said company officials are looking to 2011 to start the Eden Prairie project and want to start the first phase of the Wayzata project this fall. Both of the Wayzata and Eden Prairie projects top $200 million.
“Obviously, bigger projects are more difficult to finance in this market,” Mehrkens said. “It’s been a challenging time, but we’re looking forward to better days.”
Also looking forward to better days are employees of Des Moines, Iowa-based Life Care Services. Company officials in 2007 began pitching Trillium Woods, a large senior housing campus proposed for a site in Plymouth. The project has yet to secure financing and break ground.
The company paid more than $11.5 million in August 2008 for parcels making up the 46-acre site and got final approvals for the project from the city in October 2008.
The budget for the first phase of the project is about $87 million. But finding financing has been tough.
Steve Nornes, senior project development manager with Life Care Services, said if everything falls into place, the project could start in the third quarter of this year. If that doesn’t happen, he’s looking to the second quarter of 2011.
“That’s where most people predict things will loosen up,” Nornes said of the project timing.
The first phase of Trillium Woods calls for 209 independent living units and 44 units in a health care center. Nornes said that the project calls for a 20-month construction cycle. The project team includes Minneapolis-based Kraus-Anderson as general contractor. The Bremerton, Wash.-based architecture firm of Rice Fergus Miller designed the project.
“We’re starting to see across the country some projects now getting financed. Currently lenders are wanting you to be over 70 percent (of units reserved),” Nornes said.
Nornes said Life Care Services officials are confident they have a solid site.
“We think the site is a good site. It’s a strong market,” Nornes said. “Things are starting to be on the upswing. We’re optimistic that things are getting better.”