October 13, 2024 • 56 mins
Ever wondered how senior housing is evolving to meet the needs of an aging population? Join us for an enlightening conversation with Matt Derrick, Managing Director of Confluent Senior Living, who shares his wealth of knowledge gained from over 15 years in the real estate sector. Matt takes us through his journey from Opus Northwest to spearheading Confluent's senior housing division, revealing innovative strategies that have set them apart in this competitive market. Learn how the division of roles in real estate development can leverage individual strengths and drive success, contributing to an impressive track record of 26 ground-up projects.
Discover the dynamics of the senior housing market as Matt and our host, John Hauber, tackle the challenges and opportunities presented by shifting demographics in areas like Houston and North Dallas. With a diverse cultural backdrop influencing housing demand, understanding these nuances is crucial for developers and investors alike. We also explore the untapped potential of the active adult space, highlighting how it offers a unique avenue to expand on traditional assisted living by catering to a broader spectrum of needs. As development capital becomes more accessible, the senior housing market is ripe with possibilities for those ready to seize the moment.
In our final segments, technology takes center stage as we discuss its pivotal role in enhancing residents' lives within senior communities. Matt outlines Confluent's future strategies, focusing on prime site selection and strategic capital partnerships that promise growth. We celebrate Matt's contributions to the industry and his successful collaborations with top operators. Don't miss this insightful discussion that not only covers the present landscape but also casts a vision for the future of senior living.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:07):
A lot of real estate development firms will basically
hire a real estate guy likemyself to go out and source the
deal, negotiate the deal, workwith consultants to design the
deal, get the deal entitled,manage the construction and
basically just be, you know,kind of a soup to nuts guy.
You know that does everything.
And while that works for manygroups and it's a tried and true
(00:31):
method for us, we thought itwas better to separate some of
those roles and have peoplefocus on the things that they're
really good at.
So oftentimes real estate quoteunquote deal guys are not the
best guys to run entitlementsand vice versa.
Entitlement guys aren't alwaysthe best to be out there
(00:51):
sourcing deals and shaking handsand kissing babies.
So we kind of we separatedthose two.
Speaker 2 (01:04):
Welcome to the Senior Housing Investors Podcast.
If you are an owner operator,investor, developer or buyer of
senior housing, you've come tothe right place.
The best way to stay connectedwith us is to sign up for our
weekly newsletter athavenseniorinvestmentscom.
This podcast doesn't existwithout you, our community.
(01:26):
Thank you for listening andreach out to us anytime.
Speaker 3 (01:36):
Welcome back everyone .
Today, our host, john Haber, isspeaking with Matt Derrick.
Matt is the Managing Directorat Confluence Senior Living on
their Senior Housing DevelopmentTeam.
Matt has a diverse real estatebackground and started his real
estate development career over15 years ago at Opus Northwest.
Matt is a Denver native andholds a bachelor's degree from
(01:56):
the University of Colorado atBoulder and a master's degree in
real estate and constructionmanagement from the University
of Denver.
Listen in as John and Matt talkall about senior housing
development.
Speaker 2 (02:07):
John so today we have Matt and Matt's been introduced
to you, and we're reallyexcited to have you on the show.
Matt, I've been following youguys for many, many years and,
you know, for the last sevenyears I've known a lot about you
.
Tell us a little bit aboutyourself and your work at
(02:29):
Confluent Senior Living.
Speaker 1 (02:32):
Yeah, I appreciate it .
I'm really excited to be on thepodcast today.
I've listened to some of yourepisodes and I'm really excited
to chat with you.
So yeah, as you mentioned, myname is Matt Derrick.
I'm the Managing Director ofConfluent Senior Living.
I've been here with Confluentcoming up on gosh nine years now
and I've had a really great runhere at Confluent Senior Living
(02:53):
pre-COVID and post-COVID.
So since that time I startedout as the I think, a Senior
Development Manager and reallyhave kind of worked my way up to
now to the point where I leadthe senior housing division of
Confluent.
So kind of just a little bit ofbackground.
So Confluent Senior Living is asubsidiary of a larger real
(03:14):
estate and investment firmcalled Confluent Development.
Confluent Development's beenaround since 2015, but was a
merger of two organizations.
So there was MBG Development,which was a smaller
single-tenant retail developer,had been around since the
mid-90s, and then Confluent wasa company that was created by
(03:38):
Marshall Burton, our CEO, andCeleste Tanner, our Chief
Development Officer, who bothcame from Opus, which is also
where I worked previously, sokind of came back together.
Since that time we've done 26ground-up senior living
developments across the UnitedStates and so I have worked on
(03:59):
virtually all of thosecommunities there were a handful
that were before my tenure butwe've had great success.
And then Confluent Developmentalso does office, industrial,
retail, multifamily mixed use.
But I really run the seniorhousing and active adult portion
of the business.
Speaker 2 (04:18):
Well, that's impressive.
So I had read on yourbackground that you actually got
your master's out of Universityof Denver Correct.
Tell us a little bit about that.
Why was that important?
Because I have another friendwho also got his master's in
real estate and development fromUniversity of Denver.
Tell us about that school andwhy a lot of guys like you come
(04:43):
out of that school and doextremely well in the
development space.
Speaker 1 (04:48):
Sure, yeah, so yeah, that will have to rewind the
clock a little bit.
But yeah, I was, you know, 2006or 2007,.
I was working at Opus.
It was my first real estatedevelopment job Really had
learned that that was what Iwanted to do with my career.
Was real estate development jobreally had learned that that
was what I wanted to do with mycareer was real estate
development.
I have a passion for it.
I love the creative nature ofit.
(05:10):
But I also love the tangiblenature of it in the sense that I
, you know, to this day I candrive down streets in Denver and
then point out to my children abuilding that I built 20 years
ago.
That's fun to me.
So I was at Opus, knew this iswhat I wanted to do and if I was
going to do it, I was going todo it right and I wanted to be
the best.
And so I started looking atgraduate schools that I could do
(05:33):
while working at Opus andlooked at a couple of schools in
the area, looked at some.
You know this is kind of apre-online education type stuff.
So, and you know, the Danielschool over at University of
Denver was was a front runnerfor sure.
So joining that group had madeamazing relationships.
(05:54):
The professors are wonderful,it's just been.
You know the DU community hasbeen great.
But but for me it was reallyjust an opportunity to make sure
that I was preparing myself forthe long haul for this career,
which is going to have lots ofups and downs and challenges and
obstacles, and I wanted to makesure that I was preparing
(06:15):
myself to be the best and BUhelped me to do that and it's a
great, great school and I wouldrecommend it for anyone who
wants to go this career pathschool and I would recommend it
for anyone who wants to go thiscareer path.
Speaker 2 (06:28):
Yeah, my son had a choice between DU and University
of North Carolina, Chapel Hill.
He is a Daniels scholar, andjust some background.
Bill Daniels went to my highschool, which is New Mexico
Military Institute, and so I'vemet him personally back when he
was alive and back when I was alittle bit younger.
But yeah, absolutely Great,great school, great business
(06:52):
school at Daniel's School ofBusiness.
So that's awesome.
And so tell me ConfluentSeniors Living's role in the
senior housing market and how itdifferentiates itself from
other developers yeah, yeah,it's a good question.
Speaker 1 (07:10):
So you know we, you know we've got a pretty at this
point.
You know some pretty greatexperience, having having worked
more than 20 senior housingprojects.
So I think what differentiatesus I'm going to start with
Confluent in general so we as adevelopment company have kind of
identified the skill sets ofour team and make sure that
(07:32):
we're having people focused onthe right things, the things
that they're best at.
A lot of real estatedevelopment firms will basically
hire a real estate guy likemyself to go out and source the
deal, negotiate the deal, workwith consultants to design the
deal, get the deal entitled,manage the construction and
basically just be kind of thesoup to nuts guy that does
(07:53):
everything.
And while that works for manygroups and it's a tried and true
method for us, we thought itwas better to separate some of
those roles and have peoplefocused on the thing that
they're really good at.
So oftentimes real estate quote, unquote, deal guys are not the
best guys to run entitlementsand vice versa, Entitlements
(08:14):
guys aren't always the best tobe out there sourcing deals and
shaking hands and kissing babies.
So we kind of we separatedthose two.
So we separated those two andso we have an in-house
entitlements team.
These are former planningcommissioners and planning staff
members.
They eat, breathe, sweepentitlements and so that gives
(08:37):
us a true edge in the market.
So when we go out and we'relooking at deals, we know that
we have I would put myentitlements team up against
anyone in the country.
We have an almost 100% successrate once we take a project,
past due diligence, that weclose on that land and we
execute on the project.
And that's just because theyknow exactly what they're doing.
They speak the language,they're very strategic, they're
very political.
Now what that does is it freesup the deal guys to go out and
(09:01):
get more deals.
So we go and source the deal.
We're involved in the deal fromday one till the day we close,
till we sell it.
But we can kind of hand it offto our entitlements guy.
While they go and get theentitlements we can be spending
time out getting the next dealteed up for the future.
So that makes us unique.
We have in-house constructionmanagement, in-house finance,
(09:21):
in-house accounting, legalacross the board.
So I think that makes Confluentvery, very strong From a senior
living perspective.
You know, I think we are a veryhands-on group, Maybe to a fault
for some people.
We've had some architects justtell us I've just never had an
owner so involved in everydecision.
(09:41):
We are, you know, we are inevery design meeting.
We are in every decision, downto the, to the doorknobs and the
faucets and the light bulbs.
You know we're going to beinvolved in that and we're very.
We have strong opinions andwe're not afraid to voice those.
But also, what I think is veryimportant is we truly value our
operator relationships and we'renot the group that is going to
(10:06):
go buy up a piece of dirt or tieup a piece of dirt, get a
building entitled, design it andthen call all of the operators
to see who wants to operate it.
For us that's not the model.
Some people do that.
I think it can work.
I just don't think it's thebest way.
For us it's really identifyingour operating partners first,
(10:26):
and then we go and identify themarkets that they want to be in,
the sub markets they want to beon.
We go in and find the sites andthen really it's a
collaborative effort with ouroperating partners so we don't
make decisions that don'tsupport our operators.
So my philosophy is that thebest thing I can do and the best
(10:47):
way from Confluent to besuccessful is to design and
deliver a building that myoperator can operate
successfully.
So I really think that justmakes us unique and kind of
gives us an edge on thecompetition.
So the operating partners aretruly important to us and we
have a variety of those.
Speaker 2 (11:07):
So, as a dealmaker, matt, you're going out and
you're identifying where yourteam members are, identifying
the area, the sub-market,whatever that may be.
Tell us kind of the technologythat you use or the means of
being able to identify for youroperator the piece of land to
(11:29):
make sense for the project.
Speaker 1 (11:34):
Sure, yeah, I mean, it's a process that has evolved
over time, obviously, and youknow we were just talking about
Kyle Gardner over atNickMapVision, who's a friend,
and their technology has changedthe game in my opinion.
So you know, a decade ago itwas you.
Would you know you would hire athird party consultant to come
(11:58):
and do a what we call a desktopstudy of the market.
Call it a quick look and let usknow if there's demand.
Idea of a market.
Call it a quick look and let usknow A if there's demand.
Now you can really look at anyof these markets from your
computer and really identifywhere's the supply?
Is there demand?
Look at the affluence, thedemographics, et cetera, et
cetera.
So when we take a step back, wesit down and we have a handful
(12:23):
of operating partners we workwith, and sometimes it's a
little more organic and it'sokay, where are you today, where
do you want to be?
And let's focus on those places, right.
And so sometimes like, hey, wewant to be, let's just pick a
random.
Let's say Denver.
We want to be in Denver.
Okay, denver is a big city.
What part of Denver do we wantto be in?
And it's like, okay, well, whatdo we need?
We need to make sure, a thatthere's the supply and demand
(12:46):
market is there.
We need B, we need to make surethat there's enough affluence
that the people can afford ourproduct.
We need visibility, we needadjacency to high-end retail, we
need adjacency to high-endhomes, et cetera, et cetera, and
so we kind of will then funnelit down to a sub-market that we
think works and it's usuallywithin a three or five mile
(13:08):
radius.
And then it's kind of old schoolland sourcing.
It's working with localcontacts, it's working with
local brokers, local architects,local civil engineers, local
land use attorneys and going outthere.
And sometimes it's just it'svery old school and it's just
getting in your car and youdrive the market and you see a
(13:28):
site that maybe just doesn'tseem to fit and doesn't seem to
make sense, or you see thevision of a property or of the
future committee community onthat site and you try to tie up
that land.
So we're we've been verysuccessful at that.
As I mentioned, we've builtsenior housing communities
across the United States in highbarrier to entry markets.
We've got communities fromPortland Oregon to Portland
(13:50):
Maine and from Florida andCalifornia and everything kind
of in between, and we've hadsuccess going to each and every
one of those markets neverhaving set foot in them
previously, and have been ableto find really A-plus sites in
A-plus markets using that model.
But, as I mentioned earlier,operators involved in every one
(14:12):
of those decisions.
Speaker 2 (14:13):
That's correct, and so they're also using, you know,
NICMAP Vision, most of them toidentify areas that they want to
go into.
So big plug for Nick MattVision, Kyle Gardner what
they've accomplished over there.
It's funny.
I think we started with VisionLTC back when they were just two
(14:38):
guys right and working withthem to give us the data that we
really needed, and one of theareas that we really needed was
understanding of all licensedbeds in a marketplace, Because
what happened is that theconsultants out there were using
demographics data, but whatthey didn't understand is that
(15:00):
there's a lot of licensed bedsin the marketplace that are
under 25 beds, and so just inthe Denver area, we can state
basically around 40% of alllicensed beds are in communities
that are under 25 beds, and sothe ability to understand all
licensed beds is extremelyimportant in the marketplace.
(15:22):
How have you addressed that?
I mean this is kind of gettinga little bit off, but how do you
address that marketplace wherethere's bed counts of eight
licenses in a home or 12licenses or 15 licenses that
aren't being counted in typicalconsultants?
Overview of marketplace.
Speaker 1 (15:42):
Yeah, so when we pull all the data for a sub-market,
there's kind of two bucketsthere's the competitive units
and the non-competitive units,and so what we are delivering is
really a high-end kind ofluxury senior housing product
that's independent living,assisted living and memory care,
and so we have to go and thenwe could just look at the total
(16:05):
supply and, and you know, factorthat into the demand, and but
that's not really the best wayto look at it, because what
you're also dealing with is notonly the smaller mom and pops
that have, you know, eight beds,20 beds, 30 beds those are not
true, true competitors, right,and so we don't, we will factor
those down because I think it'sa different resident profile.
(16:26):
What we'll also do is look atthe age of the building.
If the building is 30, 40, 50years old, also we'll probably
factor that down some percentage.
So we get to a true unmet beddemand.
(16:47):
Just one extra level ofconservatism that we put in
there is we want to make surethat our projects will not be
capturing any more than 30% ofthe total unmet bed demand in
the sub-market.
So that basically tells me thatif we were to move forward and
invest the pre-developmentdollars, take down the land, put
all the effort that goes intothese buildings.
Two more projects could come inbehind us and we still believe
(17:08):
we would be successful.
So it's just another bufferthat we give ourselves there
when we go into a sub market.
Speaker 2 (17:30):
So, matt, I'm curious how do you identify different
subsets of nationality?
As you know, this country isbecoming very diverse,
especially in Houston and NorthDallas.
I was just at a Rotary, one ofour Rotary meetings, and the
superintendent for Frisco ISDstated that 43% of all children
in the school system are Asiandescent.
So how do you factor in thatgroup of high net worth,
(17:53):
potential high net worthindividuals with parents that
tend not to go into seniorliving?
But when we do our studies wesee the unmet demand in the area
.
How do we factor in that sideof the equation or how do you
factor in that side?
Speaker 1 (18:10):
Yeah, that one can be a little tricky because you can
get lulled to sleep with highunmet bed demand numbers because
of the population, and so, yeah, that's another thing we look
at and I think this should bethe takeaway for anyone
listening you can't just look atthe data and just make a brush
decision.
Oh look, there's 100,000 peoplein a three-mile radius.
(18:33):
We're going to go do this dealwhatever.
You got to dig deeper.
You got to go into the actualthe inputs and so like, if we
see a market that has high inthat demand, we're going to look
at that.
And we're going to look at thedemographics and, frankly, there
are some populations that justhave not adopted senior living
yet and so we have to factorthat in adopted senior living
(18:55):
yet and so we have to factorthat in.
There have been markets thatwe've gone to that have a
population of people that justwe know that they just have not
accepted or have not adopted thesenior housing model yet and so
we will walk away from thatmarket just knowing that that
unmet bed demand probably needsto be factored down by 50%, 75%
based on our knowledge of thespace.
But I think that it's changing.
You also kind of got to look at.
(19:16):
You know, it's just firstgeneration, second, third,
fourth generation, and as youget into further generation,
those I think as you adopt kindof the culture of the United
States and start to adopt maybethe senior living model, I think
that we can get morecomfortable with that.
So definitely more nuanced.
Speaker 2 (19:38):
Awesome, thanks.
I appreciate that answer tothat.
And so what are you seeingright now?
That are the key opportunitiesand obstacles for developers and
investors right now.
Speaker 1 (19:51):
Yeah, I mean this probably won't be a bright
insight that no one's talkedabout before, but the supply and
demand or environment thatwe're heading into is, I think,
a once in a lifetime opportunityfor the senior housing space.
You know supply has beendropping since 2017.
You know 2017, it was just, youknow, we just kind of got
(20:13):
overbuilt 2020, we got thepandemic 2021-22, we have the
interest rate run up andbasically the banks pretty much
stopped lending.
So the amount of supply hasbeen dropping for the last seven
years and, in the meantime,that baby boomer wave that this
industry has been talking aboutfor decades is actually here.
(20:36):
Uh, we are kind of at the no uh.
You know, you look at a wave.
We're at the node, right at thebase of the baby boomer wave.
I think 10 000 people areturning 80 every day.
So it's here.
You know, we've been talkingabout it, we've been waiting.
So, as challenging as the lastfew years have been and they
have have been challenging fornot only the senior housing
space but also for commercialreal estate, which has been
(20:59):
affected heavily by the interestrate run up we find ourselves
in this perfect storm of supplyand demand.
I think there's going to besuch an opportunity that once
the development capital frees upagain, which we're starting to
see it's starting to thaw.
The 50 basis point cut by theFed a couple of weeks ago was
welcome news.
It wasn't an on-off switchPeople aren't throwing me bags
(21:23):
of money just yet but it'sdefinitely it was a good
indicator that things arechanging.
So I think when that happensand development capital starts
freeing up again, I think you'rejust going to have an amazing
opportunity to capitalize onwhat I think is just going to be
, as I said, aonce-in-a-lifetime opportunity
where demand is surging andsupply is just meaningfully low.
(21:46):
There is going to be a verylimited amount of new quality
product and so really excitedabout our portfolio that we
currently have.
So you know, this supply demandenvironment does a couple of
things.
It helps with the occupancy ofall the communities that have
been struggling since COVID I'mgoing to try not to say COVID
(22:06):
more than once in this podcast,but they've been trying so
occupancies are coming back upto to pre pandemic levels.
Margins are increasing as well.
So I think it helps with that.
And then I think there's just tobe a great opportunity so that
if we can get in the ground withnew communities here in late 24
, 2025, I think there's justgoing to be a great opportunity.
(22:29):
I think we're going to startseeing cap rate compression come
back down to be a morenormalized investment cycle and
I think you're going to seevalues increase and I think
newer communities coming out ofthis will be.
I think there will be a lot ofpotential future buyers that are
going to be willing to reallypay up for high quality
(22:52):
communities in hybrid entrymarkets with top-tier operators,
and really that's what we'refocused on right now.
So I think that's one of thegreat opportunities.
I firmly believe in theopportunity of the active adult
space.
We've been evaluating activeadult for Gosh.
We looked at it probably 5 or 6years ago, decided it wasn't
(23:12):
the right time.
Gosh we looked at it probablyfive or six years ago, decided
it wasn't the right time,launched an active adult
business plan about two yearsago and are really beginning to
execute on that.
So we have about five sitesunder control that are currently
in early stages of design anddevelopment for active adults.
I think, that does a couple ofthings.
I think it allows us tobasically slide down the acuity
(23:33):
scale.
So we have typically done, youknow, assisted living, memory
care.
We have kind of found that ourindependent living assisted
living memory care communitiesare doing better.
So we're really focused on theon the continuum of care for our
senior communities.
But you know, the average agein a senior community is 82
years old.
The average age in a activeadult community is 72 years old.
(23:55):
So we see an opportunity to gocapture some of those younger
baby boomers sooner, get theminto the quote-unquote senior
housing space earlier, and wethink that's a great opportunity
.
I mean, if you look at it, Ithink there's 110,000 active
adult units in the countrycompared to 1.8 million units of
senior housing.
(24:15):
It's just that is completelylopsided.
That seems like there's areally great opportunity there
and so we're going to capitalizeon that.
So I think for the future,consul and Senior Living will be
probably 50% senior, 50% activeadult for the foreseeable
future.
So we're pretty excited aboutthat.
I think active adult also couldhelp solve one of the major
(24:38):
problems that senior housing hasbeen facing since I've been
here and long before, which isthat middle market that
currently isn't being served.
So active adult provides a moreattainable product.
That is kind of an entry pointto senior living.
It doesn't solve all theproblems but it certainly helps
get people in.
You can start bringing in homehealth care.
You can start to service someof those older adults as they
(25:02):
start needing some assistance.
So that's the opportunities.
I think the opportunities arevast.
There's lots of opportunitiesI'm excited about.
I think it's a really fun timeto be in the senior housing
space.
We paid our dues over the lastseveral years and I think it's
about time to start having somefun again, which we're looking
(25:24):
forward to.
But, that being said, there arestill obstacles that we need to
overcome, Obviously, justcapital availability in general.
Both debt and equity arechallenging and I think that's
driven.
Cost of capital is up.
That will hopefully startcoming down as we enter a Fed
rate-cutting cycle.
(25:44):
But also there's still a lot ofdistressed assets out there and
I think that's due to whetherthat's due to fund life, whether
that's due to debt maturities.
I think there's still a lot ofacquisition opportunities out
there, and so we have seen thatmost capital, sophisticated
capital that understands thesenior housing space understands
(26:04):
that they can still go out andacquire existing assets for
below replacement costs.
So it's hard for them to shifttheir mind over to development
capital right now because thereturns on the acquisitions are,
frankly, they're gettingsimilar to development returns
right now.
But I don't think theacquisition pool is going to
(26:27):
last too long.
There will still always beopportunities.
There'll always be distress,but I think that window is
closing.
It may take another 12, 18months for it to close to a more
normal cadence, but I thinkafter that, forward-thinking
(26:47):
investors are going to look atpast that acquisition window and
look at the development window,and I think that's coming.
We're already seeing a lot moreinterest in development deals
that we have in the pipeline,and so we're looking forward to
to basically getting thosegetting in, those those in the
ground, sooner rather than later, to to really capitalize on
that supply and demandenvironment that I was talking
(27:08):
about earlier.
Speaker 2 (27:10):
Yeah, it's, it's, it's.
You know, as, as I've stated inprevious podcasts, 806,000
units need to be built in thenext six years to cover the
demand in the marketplace.
That's over $300 billion worthof money that needs to be
invested in this space.
So tell me the structure thatyou go to the marketplace with
(27:33):
when it comes to attracting debtand capital.
What's your capital stack looklike for a typical development
that you're involved in?
Speaker 1 (27:43):
Yeah, well, we're going to kind of have to look at
that and what it was and what Ibelieve it's going to be, so
typically it has been.
We have dealt almost solely withultra high net worth investors.
So you know we are owned by anultra high net worth family, we
partner with them and other youknow high net worth families and
(28:03):
that is typically how we'vegotten I think almost all of our
deals done to date.
We have done one institutionaldevelopment deal and it went
well, but typically we have justkind of focused on our ultra
high net worth and that's workedout great.
Where I think we're going andkind of what I'm calling
Confluent 2.0, which I think isjust the next phase of this
(28:24):
company, I think we're going tobe focused more on some of those
larger institutional investmentpartners, reason being the deal
sizes are just getting largerand, as I mentioned earlier,
we're focused heavily onindependent living, assisted
living, memory care.
If you look back at our earlierportfolio, we were doing 60, 70,
(28:47):
80-unit ALMC deals and thosethings are great.
But those are smaller equitychecks.
Those are smaller deals, mucheasier to capitalize.
If you move into the largerbuildings, if we're going to do
a true IL, al and C building andyou want to do it right, we
believe you have to have aminimum of 60 to 80 IL units,
probably 40 IL units and 20 to30 memory carry units.
(29:09):
Well, your deal size justtripled, if not quadrupled, from
what previous deals we havedone.
So those equity checks getlarger.
So I think we're going to seeus working with our high net
worth, will still be involved inthe deal, probably more in a GP
structure, but we'll be lookingfor more of those conversations
(29:31):
right now and excited to launchsome of those new programmatic
relationships to reallycapitalize on this pipeline.
I haven't mentioned it yet butour pipeline currently is a
little more than $700 million indevelopment deals.
That is the largest pipeline wehave ever had.
We've been strategicallybuilding that for the last
(29:53):
several years in anticipation ofthe recovery.
Speaker 2 (30:01):
So of that $700 million, what is the breakdown
as it relates to active adult,AL, memory care, continuing care
communities?
What's that breakdown in yourdevelopment pipeline Sure?
Speaker 1 (30:18):
So I've probably got two projects that are just ALMC.
You know, call that $100million ballpark.
I've got two senior projectsthat are IL ALMC with cottages.
That's probably in the $300plus million range between those
350 million, between those twoprojects.
And then I've got four or fiveactive adult projects that are
(30:43):
75 to 100 million.
So it's pretty.
It's about half and half,probably still a little heavier
to the senior right now.
Just because that space we'vebeen playing in for so long and
as we continue to add activeadult deals, deals to our uh, to
our pipeline, that'll continueto grow.
But, like I said, I anticipatewe'll be in that 50 50 range
moving forward.
Um, so yeah, still believe inthe senior housing, traditional
(31:05):
senior housing space, but Ibelieve just we're really just
extending it into that activeadult space as well so matt.
Speaker 2 (31:12):
Define adult we get this question quite a bit from
our community.
Define active adult and then,if you can go into, what do the
seniors in the active adult sidewant in a community?
What's being designed today?
What space requirements arethey requiring?
As I've heard in the past,individuals considering active
(31:37):
adults are having to downsizefrom their homes where they have
a bit of stuff, and so what arethey looking for today?
Speaker 1 (31:46):
Okay, yeah, absolutely so.
Active adult.
Yeah, that's been the challengewith the space right.
What is it?
Because I think there'sactually a range of what it is.
You've got all the way on thelet's call it to the left.
You've got your aisle lightright, which is very similar to
independent living, maybe not asmuch care.
(32:06):
You've got dining.
You've got some of the thingsthat feel independent.
That's kind of on the far left.
On the far right you've gotbasically just a senior
apartment with nothing.
It's just market rate, but withan older population.
So some people define activedevelopment differently.
I think it's.
You know.
My definition is basically it'svery similar to a market rate
(32:26):
apartment.
It's very community focused.
I look at this as I want tobuild a vertical neighborhood.
Right, you want it's going tobe larger units, so that those
people are downsizing from ahome they've probably lived in
for 10, 20 years.
They've got all their stuff.
They're going to have achallenge moving down to a 500
square foot apartment.
They don't want that.
(32:47):
So we're focused on onebedrooms, two bedrooms, even
three bedrooms.
These are larger units than youwould see in a typical market
rate community.
We're going to have a lot ofactivity space, you know.
So it's.
It's a display kitchen, it'swhere you can take cooking
classes.
It's art rooms, it's gyms, it'syoga, it's pool, it's, you know
, room for card games.
It's a lot of multi-purposerooms where people can have
(33:10):
larger gatherings.
You can have an ability tobreak the rooms up with dividers
so that you can have differentactivities.
I think the key to me forsomeone to be willing to pay the
premium for an active adultunit over a typical market rate,
you have to have a sense ofcommunity.
They have to want to be there,they have to want to leave their
(33:31):
home to go and live with peoplethat are, you know, like-minded
, at a similar phase of lifeMany retired, some still working
, whether that's part-time orvolunteer, but they really want
to have an active lifestyle.
I mean, frankly, you know, areason to get up in the morning
and to go and live out the bestyears of your life, the golden
(33:55):
years of your life, with, withpeople in a similar, similar,
you know, point in the cycle.
So I think that's a big, heavyfocus.
It's quality Uh, it's, you knowit's we're going to focus on on
the higher end side of things,not not luxury, you know, ritz
Carltonton, four Seasons, butstill attainable, but make sure
that it's good quality that willattract those folks out of
(34:16):
their homes.
And similarly for the seniorspace.
I think it's like I mentioned.
We're heavily focused on IRA.
Omc Cottages is a big part ofwhat we're doing in the future,
if the land is available, justbecause we see that as another
diversification of product typebut also just an entry point for
residents who might not bequite ready to move into a
(34:37):
vertical senior housingcommunity.
But really it's just bothsenior and active adult.
We're focused on socialwell-being, just overall
wellness.
We're focused on recreation.
We're focused on just a senseof community that I think we all
as humans strive for.
I think that's just going to bedriving every decision that we
(35:01):
make For active adults.
I think the simple answer for alot of people is there's no
dining.
You know we may build out agray box of kitchens that give
us some versatility in thefuture if we need it.
But in general it's going to bemore focused on kind of the
community and the lifestyle forthese future residents.
Speaker 2 (35:22):
Well, thanks for that answer.
That's an extremely importantanswer because there is that
misunderstanding in themarketplace between IL and
active adult, and I can give anexample my mother lost her
husband to dementia and age andwent into a 55-plus community
(35:44):
and just loves it.
I mean, she told me the otherday she was down watching the
football game with eight otherpeople.
And so I feel both, on one hand, the importance of community,
but also mental health.
We as human beings are meant tobe in community with each other
(36:06):
, and so your part in developingactive adult, I believe, is
extremely important for seniors,and the need to get out of the
home where you're isolated,potentially maybe living alone,
to come into an active adult andbe thriving and being involved
(36:31):
in activities and other people'slives is extremely important.
So thank you for what you'redoing on that side, matt, you're
confluent.
Speaker 1 (36:37):
Yeah, yeah, I would actually add to that.
You know, as I mentionedearlier in our conversation, you
know I've worked in.
You know various facets ofcommercial real estate I've
worked in.
You know mixed use, multifamilyland, home building, asset
management, entitlements acrossthe board, senior housing and
(37:00):
active adult is such a greatspace because you get to do all
those things, you get the joy ofcreativity, you get the joy of
building a tangible asset.
But the one thing that I didn'tmention is walking into a
senior housing community or nowan active adult community that
you've developed and you canwalk in and see and hear and
frankly feel the livelihood thatthis community brings is maybe
(37:24):
one of the biggest rewards thatwe get from building these
communities.
You know I talked about ourentitlements team.
Our entitlements team is on thefront end, right, so they get
the project entitled and thenthey kind of move on to the next
deal after they've done theirjob.
And so I've made a point tomake sure that our entitlements
team and our construction teamare going back and visiting the
community six to 12 months afterit's open to see what it feels
(37:48):
like, and I think that's kind offuel for them to keep going in
challenging times.
You have to walk into acommunity.
I'll never forget we took oneof our entitlements guys to a
community.
We did it down in Memphis andhe walked in and you couldn't
wipe the smile off of his faceCause he's just amazing.
Like I worked so hard.
I worked so hard on thisproject, but it was five years
ago and now I get to see.
You know, it's just it, it'salive, it has a pulse.
(38:10):
These people are happy andlaughing.
It was like 10.30 in themorning and the place was
buzzing.
It's something that getsglossed over.
Oftentimes we're all movingquickly, we're all on to the
next deal, but sometimes youjust got to pause and remember
why we are doing this, and Ithink that's an important factor
.
Yes, we all want to make aprofit for our investors.
(38:32):
We want to make profit forourselves and for our families,
but to be able to do that whilesimultaneously improving the
lives of people that we franklyowe everything to.
They have invested in ourcommunity, they've invested in
this country, and to be able togive back in sense and invest in
them is a really it's a greatreward that I don't think we
(38:55):
talk about enough.
Speaker 2 (38:57):
I agree.
So thank you for what you allare doing and continue to do.
So let's talk about theevolving needs of the seniors
and what you're doing in termsof development guidelines.
When it comes to technology,when it comes to integrating
community-wide internet,whatever that is, can you kind
(39:20):
of address those designstandards that you're now
employing?
Because I mean, as you know,it's just things are changing so
quickly, as I've stated in aprevious podcast, you know going
to, in three years, havehumanoid robots in our
communities.
So tell us a little bit aboutwhat you're thinking, matt, when
it comes to that future living.
(39:42):
That is coming on to us prettyquickly.
Speaker 1 (39:46):
Yeah, you said it.
You know, every time the phrasetechnology comes in in senior
housing, I kind of I can'tpretend to know what the future
looks like.
Right, but what I can do ismake sure that my building is
prepared to adapt to the future.
Like I don't know what thatnext technology is.
Technology is changing so fast.
(40:06):
You know, you look, you knowyou heard your previous
conversations, but you know chatGPT-1 and we're moving on to
chat GPT-5 or whatever it is.
One is just obsolete at thispoint, and that's how technology
is going.
I am a firm believer that thesenior resident of tomorrow is
not going to be happy with thesenior living community of today
, and I think the biggest changethat is going to be required is
(40:30):
going to be access totechnology technology that not
only improves their connectivityto their family and friends and
to, frankly, the outside world,but also technology that
improves their livelihood.
I think we're finding ourselvesin this what I'm going to call
(40:50):
kind of a health revolution inour country and probably across
the world.
But people are much more intune with their health.
People are much healthier now,they're living longer, they are
focused on longevity andsustainability for themselves,
and so I think technology thathelps with that is going to be
very important for thecommunities that I develop in
(41:11):
the future.
I find myself in a uniqueposition because, while I am the
developer and we are the ownerof these communities, I am not
the operator right.
We partner with operatingpartners, so I can, I can, I can
certainly influence some ofthose decisions, but oftentimes
it comes down to the operator,and so all of our operators are
on board when it comes to toimplementing technology that
(41:33):
helps with the livelihood andhappiness and sustainability of
our residents, and so I thinkwe're constantly looking at
things that do that.
Also the technology thatprotects our residents from
falls or for, frankly, elderabuse, or elder abuse or any of
these, you know, or elopement,any of these things that can
(41:56):
afflict some of our communities.
We're focused on ways toimprove upon that.
So, you know, I wish I couldtell you today hey, I'm
announcing this brand newtechnology that's going to make
Consulate Buildings the bestbuildings in the industry.
I can't say that.
All I can say is that we areconstantly evaluating new
technologies that will helpimprove the lives of our
residents.
Speaker 2 (42:16):
Awesome Thanks.
You know I ask that questionbecause you are involved, as you
said earlier in our discussion,on the minute details
associated with your project,and that makes me feel that
you're involved in what flooringgoes in, what do the walls?
What is the size of the rooms?
(42:38):
How are they put together toenhance individual senior lives?
So thank you for the answer tothat question, and so let's
pivot back to Confluent and whatare the key aspects of your
plan moving forward and how doyou envision the company's
growth in the coming years?
Matt?
Speaker 1 (42:59):
Yeah, I mean, as I mentioned earlier, our key plan
is kind of going back to thebasics, which is hybrid entry
markets, a-plus sites and A-plusmarkets, and we are being super
diligent on our site locationright now.
So land availability is muchbetter now than it was pre-2020.
(43:20):
See, I didn't say the C wordthere, I just said pre-2020.
Creative ways to do that.
But so landowners, there's notas much competition for sites
right now.
So we're being very selectivewhen it comes to the sites that
we, that we are putting undercontrol.
Uh, you know the, the pipelinethat I have uh is I would say
(43:41):
these are some of the best siteswe've ever done.
Uh, I'm going to, you know,give an example of our most
recent success.
We just opened a project in, uhjust out in Las Vegas.
Uh, just opened a project inLas Vegas, just opened it just
under two months ago.
We're 87% pre-leased on thatbuilding, moving in 20 residents
, moving them in as quickly aswe can, as quickly as our staff
(44:01):
can support them, withoutcompromising the quality of care
that we provide that site.
We looked at probably four orfive different sites in that
market, put a couple undercontrol, just never really got
quite comfortable.
We did the homework on themarket.
We knew where we wanted to be.
We knew the sub market, we knewthe cross streets, we wanted to
be.
So when a site presented itself, we jumped on it.
(44:24):
I was going reviewing itearlier.
We submitted an offer withinfive hours of getting a site get
get the site coming across mydesk, like we knew exactly.
And so when you, when you knowa market, you're diligent, you
are patient and disciplined,you're going to be rewarded, and
so we're.
We're doing that across thecountry.
So we're really focused onmaking sure that we get these
(44:44):
sites under control.
You know, not going to lie,pursuit dollars are at a premium
right now.
Like're being very diligent onwhere we spend our money, but
what we're doing is we're thisyear I think next year we're
going to start really hittingthe gas on development.
We've got a couple of projectsthat I'll be excited to announce
(45:18):
soon, and then I think 2026 andbeyond is going to just we're
going to just kind of blow thedoors off.
I think there's going to be alot of groundbacks and I think
we're going to get to.
You know the cadence that weused to be at, which is three to
four groundbreaks per year, butthese are going to be larger
deals, so hence, as I mentionedearlier, larger equity partners.
But that's really our strategyand we, frankly, have partnered
(45:42):
with really good landowners aswell.
Frankly, the deals that I have,the senior deals that I have in
my pipeline we've been workingon for two years, plus some
longer I think I've got onethat's five years and these land
sellers have been great andwe've had to have some difficult
conversations and we've had tohave.
They want to close but we can'tbecause we're just the market's
not ready yet.
(46:02):
So we've been able torenegotiate those deals and
extend the land closings out andwe've had great partners across
the board that have beenwilling to do that.
We haven't had to walk awayfrom a single deal because our
landowners have been willing towork with us and I'm looking
forward to, you know, to givingthat good call that we're going
to be closing on some of theseparcels sooner rather than later
(46:24):
.
Speaker 2 (46:26):
Great.
So if you were to pick the topthree states in the United
States that you feel that from2026, as you said, onward are
the top states that you salivateover, what would be those
states?
I know you're across the UnitedStates, but what are the top
three that come to mind?
Speaker 1 (46:48):
Gosh, that's such a hard question to answer Because
I think it's so nuanced, so I'mgoing to answer your question
kind of with a non-answer.
It's just so sub-market,specific.
What I can do is I can tell youwhere I am and where we're
heavily focused.
So we've got a very largeproject in Southern California
(47:09):
that I'm really excited about.
Now California can be scary forsome folks.
There's a lot of kind ofpolitical things going on there.
The taxes are super high.
You keep hearing about thismass exodus from California.
I think there are a lot ofpeople leaving California but
there's still people moving toCalifornia and there's still.
I mean, it's just the demand inCalifornia and the affluence
(47:31):
there is something that's hardto ignore.
So California, especiallySouthern California, is very
exciting to me.
Parts of Texas still veryexciting, and we talk about kind
of in-migration.
Lots of people are moving toTexas.
We have a very large projectunder control that I think we'll
be going to be breaking groundon next year in Texas.
That's a 250-unit project withIA, almc and Cottages.
(47:55):
That we're excited about.
And then so those are, you know, kind of the bigger markets.
But then we're also focused on,you know, what you call kind of
your secondary market.
So we have a project in KansasCity that we're really excited
about.
Kansas City, we have focused onits Midwest.
So you not your Southern smileor anything, but we've spent a
lot of time and energy andreally dug into the demographics
(48:18):
and the details to identifywhat we think is the best
sub-market in the SouthernKansas City market.
We have a site that's fullyentitled, ready to go
shovel-ready when the markettells us to.
We're going to pull buildingpermits and start building.
So I'm excited about that.
But yeah, I mean, I think theNortheast is very exciting just
due to density.
(48:38):
Florida gets me we have a coupleassets in Florida but it gets
me a little nervous.
There's just I've seen a lot ofdeals.
A lot of deals got done downthere in 2016 to 2019.
A lot of them are trading rightnow.
I'm finding I just think it's avery competitive market.
So I don't know if we'll bedoing a lot of deals in florida,
but really, if I had to pick,without picking a state, I'd say
(49:00):
kind of still focusing on thesouthern smile.
I think that's where you knowwe're seeing a lot of migration.
But but, that being said, thereare still pockets.
You know that if you go intomontana you can find a pocket
where they need a senior housingcommunity.
You know you just got to do thework and find it.
So we're pretty agnostic whenit comes to that.
Like, if there's an opportunityand there's demand and the
(49:21):
seniors need a new project,we'll evaluate it.
Speaker 2 (49:26):
Yeah.
So you know, I agree with you,Throughout the United States the
need is great, and so we havedevelopers calling our
consulting side of our businessat Avon Senior Investments to
run a needs analysis report.
What is the need in themarketplace?
Just real quick, what is it?
(49:46):
And that really helps those whoare looking to develop to get a
base of what they can expect inthat, let's say, 10-mile radius
or 5-mile radius or 7-mileradius.
So I agree with Matt, the needis enormous out there, and so
let's you know.
(50:06):
One more question, and thenwe'll want to know how
individuals can get in touchwith you.
What are your needs?
What would you like to say toour audience out there?
But, looking ahead, what arethe key opportunities you see
for the senior living industryand how is Confluent positioning
itself to capitalize on thoseopportunities?
Speaker 1 (50:29):
Yeah, I think the key opportunity is, once again, the
supply and demand.
Uh is just something you can'tignore.
Uh, you can't ignore it, it'sthere.
It takes I've used this phraseI probably stole it from someone
a couple times, but since I'vesaid it a couple times, I'm not
going to say that it's mine butit takes capital and courage, uh
, to to move forward withdevelopment at this time, and
(50:50):
that's what we're focused on.
We absolutely have the courage,we have the capital.
We're looking to expand ourcapital relationships moving
forward and I think you know wehave built the pipeline
strategically to take advantageof this environment.
I don't know many groups thathave a pipeline as large as we
do with A-plus assets that we do.
So we've really we haveinvested time and
(51:12):
pre-development dollars topursue these assets, so we're
ready to go.
We think, you know, while themoment might not be today, it's
closer than we all think andwe're really excited about that.
We're going to capitalize on itand really, the opportunity.
We have partnered with, Ibelieve, some of the best
operators in the country.
We have really diversified ouroperating relationships.
(51:33):
We have covered the UnitedStates strategically with really
four operating partners that wework with, and so when a site
presents itself in a market thatwe look, we know exactly who
we're going to talk to aboutthis, and so we have the entire
United States covered with ouroperating partners.
We have the entire UnitedStates covered with our
operating partners.
(51:53):
You know, we have the expertise, we have the knowledge and we
have the, frankly, the courageto go and execute on this plan
and I'm looking forward to doingit.
Like I said, the last few yearshave been extremely challenging
.
Not going to sugarcoat that atall, it is, it has been.
It is this is a tough industry,even the best days.
But it's even harder whenyou're not putting as many wins
on the board.
(52:13):
So we are really excited forthe fun to get put back in this
business and start putting winsback on the board, putting pelts
on the wall, so we're reallyexcited about it.
Speaker 2 (52:25):
So if you want to let our audience know, we have
individuals that are also highnet worth individuals listening
to this podcast.
We have institutional investors, we have the REITs and others
listening.
What do you need, what doesConfluence need from the market
when it comes to capital, andwhat kind of checks are you
(52:46):
looking for to come into thesedevelopments that are in the
pipeline?
Speaker 1 (52:51):
Yeah, I mean due to the size of these.
Once again, I think what we'vetypically done in the past is
Confluent has funded all of thepre-development dollars and
that's kind of part of the valuethat we have added.
As these deals get bigger,that's a little more challenging
to do.
So when you're talking aboutfunding, you know each project
is $3 million to $5 million ofpre-dev.
So I think we're looking forsomeone to come in and commit to
(53:13):
the deal early.
Commit to some of the pre-devdollars, not all of them, but
that would be our ideal equitypartner and, frankly, we're
comfortable with a moreprogrammatic relationship, with
pursuing multiple deals, notjust one-off deals.
I think we're open to that.
Pursuing multiple deals, notjust one-off deals, I think
we're open to that.
Typically in the past we haven'twe really enjoy the benefit of
(53:38):
being able to have as muchcontrol over our investments and
our future.
I think we're willing to giveup some of that control to
partner to make sure that we canexecute on all of these
projects.
I think that's going to take alarger institutional partner.
When it comes to deal size, Imean you mentioned earlier you
know the project in SouthernCalifornia is north of $200
million.
You know the one in Texas isnorth of $100 million.
(53:58):
Each of these projects, theprices are going up.
So depending on you know theloan to cost.
You know you could be talkinganywhere from $30 to $80 million
equity checks on some of thesedeveloping deals.
So we're not talking smalldeals anymore.
So we're also havingconversations about our current
portfolio.
We've got a portfolio of12-season assets, so what should
(54:24):
we be doing with those as well?
We've got some strategicone-off sales that we're working
through currently, but theremight be a larger and more
strategic play in place as well.
Speaker 2 (54:38):
Well, harrison Street just announced that they raised
over a billion dollars fortheir senior living fund.
So there's money out there andit's a very exciting time to be
in this space for at least thenext.
I only look maybe five, tenyears, five years because it's
changing so rapidly, and so fiveyears a very exciting time, and
(55:02):
so I really appreciate youbeing part of this podcast today
, matt, how do individuals getin touch with you that want to
write those big checks to you?
Speaker 1 (55:15):
Yes, you can just write the checks to Matt Derrick
Just mail it to my house, I'msure.
I'll make sure it gets where itneeds to go.
No, in all seriousness, you canjust email me at mderrick at
confluentdevcom.
I'm not sure if you want to putthose in the show notes or
anything, but happy to do that.
Or you can just go toConfluentDevelopmentcom.
(55:36):
I want to make sure that I getthat web browser right.
Make sure I got that.
Yeah, it'sConfluentDevelopmentcom.
Speaker 2 (55:48):
Yeah, and then just go click over onto the senior
living side of the site andyou'll see what their portfolio
looks like.
And I can attest you areworking with the top operators
in this space.
And congratulations to yoursuccess, matt.
At a very young age, you'vedone a tremendous amount in this
(56:09):
space.
So congrats to Confluent andwhat you've done.
I look forward to reaching outto you as we build our
intergenerational longevity andwellness communities across the
United States here in the future, to have you part of that
development, part of it.
And so thank you again andappreciate you being part of the
(56:32):
show and have a great day.
Speaker 1 (56:35):
Yeah, thank you.
Thanks for having me Reallyappreciate it.
A lot of real estate development firms will basically
hire a real estate guy likemyself to go out and source the
deal, negotiate the deal, workwith consultants to design the
deal, get the deal entitled,manage the construction and
basically just be, you know,kind of a soup to nuts guy.
You know that does everything.
And while that works for manygroups and it's a tried and true
(00:31):
method for us, we thought itwas better to separate some of
those roles and have peoplefocus on the things that they're
really good at.
So oftentimes real estate quoteunquote deal guys are not the
best guys to run entitlementsand vice versa.
Entitlement guys aren't alwaysthe best to be out there
(00:51):
sourcing deals and shaking handsand kissing babies.
So we kind of we separatedthose two.
Speaker 2 (01:04):
Welcome to the Senior Housing Investors Podcast.
If you are an owner operator,investor, developer or buyer of
senior housing, you've come tothe right place.
The best way to stay connectedwith us is to sign up for our
weekly newsletter athavenseniorinvestmentscom.
This podcast doesn't existwithout you, our community.
(01:26):
Thank you for listening andreach out to us anytime.
Speaker 3 (01:36):
Welcome back everyone .
Today, our host, john Haber, isspeaking with Matt Derrick.
Matt is the Managing Directorat Confluence Senior Living on
their Senior Housing DevelopmentTeam.
Matt has a diverse real estatebackground and started his real
estate development career over15 years ago at Opus Northwest.
Matt is a Denver native andholds a bachelor's degree from
(01:56):
the University of Colorado atBoulder and a master's degree in
real estate and constructionmanagement from the University
of Denver.
Listen in as John and Matt talkall about senior housing
development.
Speaker 2 (02:07):
John so today we have Matt and Matt's been introduced
to you, and we're reallyexcited to have you on the show.
Matt, I've been following youguys for many, many years and,
you know, for the last sevenyears I've known a lot about you
.
Tell us a little bit aboutyourself and your work at
(02:29):
Confluent Senior Living.
Speaker 1 (02:32):
Yeah, I appreciate it .
I'm really excited to be on thepodcast today.
I've listened to some of yourepisodes and I'm really excited
to chat with you.
So yeah, as you mentioned, myname is Matt Derrick.
I'm the Managing Director ofConfluent Senior Living.
I've been here with Confluentcoming up on gosh nine years now
and I've had a really great runhere at Confluent Senior Living
(02:53):
pre-COVID and post-COVID.
So since that time I startedout as the I think, a Senior
Development Manager and reallyhave kind of worked my way up to
now to the point where I leadthe senior housing division of
Confluent.
So kind of just a little bit ofbackground.
So Confluent Senior Living is asubsidiary of a larger real
(03:14):
estate and investment firmcalled Confluent Development.
Confluent Development's beenaround since 2015, but was a
merger of two organizations.
So there was MBG Development,which was a smaller
single-tenant retail developer,had been around since the
mid-90s, and then Confluent wasa company that was created by
(03:38):
Marshall Burton, our CEO, andCeleste Tanner, our Chief
Development Officer, who bothcame from Opus, which is also
where I worked previously, sokind of came back together.
Since that time we've done 26ground-up senior living
developments across the UnitedStates and so I have worked on
(03:59):
virtually all of thosecommunities there were a handful
that were before my tenure butwe've had great success.
And then Confluent Developmentalso does office, industrial,
retail, multifamily mixed use.
But I really run the seniorhousing and active adult portion
of the business.
Speaker 2 (04:18):
Well, that's impressive.
So I had read on yourbackground that you actually got
your master's out of Universityof Denver Correct.
Tell us a little bit about that.
Why was that important?
Because I have another friendwho also got his master's in
real estate and development fromUniversity of Denver.
Tell us about that school andwhy a lot of guys like you come
(04:43):
out of that school and doextremely well in the
development space.
Speaker 1 (04:48):
Sure, yeah, so yeah, that will have to rewind the
clock a little bit.
But yeah, I was, you know, 2006or 2007,.
I was working at Opus.
It was my first real estatedevelopment job Really had
learned that that was what Iwanted to do with my career.
Was real estate development jobreally had learned that that
was what I wanted to do with mycareer was real estate
development.
I have a passion for it.
I love the creative nature ofit.
(05:10):
But I also love the tangiblenature of it in the sense that I
, you know, to this day I candrive down streets in Denver and
then point out to my children abuilding that I built 20 years
ago.
That's fun to me.
So I was at Opus, knew this iswhat I wanted to do and if I was
going to do it, I was going todo it right and I wanted to be
the best.
And so I started looking atgraduate schools that I could do
(05:33):
while working at Opus andlooked at a couple of schools in
the area, looked at some.
You know this is kind of apre-online education type stuff.
So, and you know, the Danielschool over at University of
Denver was was a front runnerfor sure.
So joining that group had madeamazing relationships.
(05:54):
The professors are wonderful,it's just been.
You know the DU community hasbeen great.
But but for me it was reallyjust an opportunity to make sure
that I was preparing myself forthe long haul for this career,
which is going to have lots ofups and downs and challenges and
obstacles, and I wanted to makesure that I was preparing
(06:15):
myself to be the best and BUhelped me to do that and it's a
great, great school and I wouldrecommend it for anyone who
wants to go this career pathschool and I would recommend it
for anyone who wants to go thiscareer path.
Speaker 2 (06:28):
Yeah, my son had a choice between DU and University
of North Carolina, Chapel Hill.
He is a Daniels scholar, andjust some background.
Bill Daniels went to my highschool, which is New Mexico
Military Institute, and so I'vemet him personally back when he
was alive and back when I was alittle bit younger.
But yeah, absolutely Great,great school, great business
(06:52):
school at Daniel's School ofBusiness.
So that's awesome.
And so tell me ConfluentSeniors Living's role in the
senior housing market and how itdifferentiates itself from
other developers yeah, yeah,it's a good question.
Speaker 1 (07:10):
So you know we, you know we've got a pretty at this
point.
You know some pretty greatexperience, having having worked
more than 20 senior housingprojects.
So I think what differentiatesus I'm going to start with
Confluent in general so we as adevelopment company have kind of
identified the skill sets ofour team and make sure that
(07:32):
we're having people focused onthe right things, the things
that they're best at.
A lot of real estatedevelopment firms will basically
hire a real estate guy likemyself to go out and source the
deal, negotiate the deal, workwith consultants to design the
deal, get the deal entitled,manage the construction and
basically just be kind of thesoup to nuts guy that does
(07:53):
everything.
And while that works for manygroups and it's a tried and true
method for us, we thought itwas better to separate some of
those roles and have peoplefocused on the thing that
they're really good at.
So oftentimes real estate quote, unquote, deal guys are not the
best guys to run entitlementsand vice versa, Entitlements
(08:14):
guys aren't always the best tobe out there sourcing deals and
shaking hands and kissing babies.
So we kind of we separatedthose two.
So we separated those two andso we have an in-house
entitlements team.
These are former planningcommissioners and planning staff
members.
They eat, breathe, sweepentitlements and so that gives
(08:37):
us a true edge in the market.
So when we go out and we'relooking at deals, we know that
we have I would put myentitlements team up against
anyone in the country.
We have an almost 100% successrate once we take a project,
past due diligence, that weclose on that land and we
execute on the project.
And that's just because theyknow exactly what they're doing.
They speak the language,they're very strategic, they're
very political.
Now what that does is it freesup the deal guys to go out and
(09:01):
get more deals.
So we go and source the deal.
We're involved in the deal fromday one till the day we close,
till we sell it.
But we can kind of hand it offto our entitlements guy.
While they go and get theentitlements we can be spending
time out getting the next dealteed up for the future.
So that makes us unique.
We have in-house constructionmanagement, in-house finance,
(09:21):
in-house accounting, legalacross the board.
So I think that makes Confluentvery, very strong From a senior
living perspective.
You know, I think we are a veryhands-on group, Maybe to a fault
for some people.
We've had some architects justtell us I've just never had an
owner so involved in everydecision.
(09:41):
We are, you know, we are inevery design meeting.
We are in every decision, downto the, to the doorknobs and the
faucets and the light bulbs.
You know we're going to beinvolved in that and we're very.
We have strong opinions andwe're not afraid to voice those.
But also, what I think is veryimportant is we truly value our
operator relationships and we'renot the group that is going to
(10:06):
go buy up a piece of dirt or tieup a piece of dirt, get a
building entitled, design it andthen call all of the operators
to see who wants to operate it.
For us that's not the model.
Some people do that.
I think it can work.
I just don't think it's thebest way.
For us it's really identifyingour operating partners first,
(10:26):
and then we go and identify themarkets that they want to be in,
the sub markets they want to beon.
We go in and find the sites andthen really it's a
collaborative effort with ouroperating partners so we don't
make decisions that don'tsupport our operators.
So my philosophy is that thebest thing I can do and the best
(10:47):
way from Confluent to besuccessful is to design and
deliver a building that myoperator can operate
successfully.
So I really think that justmakes us unique and kind of
gives us an edge on thecompetition.
So the operating partners aretruly important to us and we
have a variety of those.
Speaker 2 (11:07):
So, as a dealmaker, matt, you're going out and
you're identifying where yourteam members are, identifying
the area, the sub-market,whatever that may be.
Tell us kind of the technologythat you use or the means of
being able to identify for youroperator the piece of land to
(11:29):
make sense for the project.
Speaker 1 (11:34):
Sure, yeah, I mean, it's a process that has evolved
over time, obviously, and youknow we were just talking about
Kyle Gardner over atNickMapVision, who's a friend,
and their technology has changedthe game in my opinion.
So you know, a decade ago itwas you.
Would you know you would hire athird party consultant to come
(11:58):
and do a what we call a desktopstudy of the market.
Call it a quick look and let usknow if there's demand.
Idea of a market.
Call it a quick look and let usknow A if there's demand.
Now you can really look at anyof these markets from your
computer and really identifywhere's the supply?
Is there demand?
Look at the affluence, thedemographics, et cetera, et
cetera.
So when we take a step back, wesit down and we have a handful
(12:23):
of operating partners we workwith, and sometimes it's a
little more organic and it'sokay, where are you today, where
do you want to be?
And let's focus on those places, right.
And so sometimes like, hey, wewant to be, let's just pick a
random.
Let's say Denver.
We want to be in Denver.
Okay, denver is a big city.
What part of Denver do we wantto be in?
And it's like, okay, well, whatdo we need?
We need to make sure, a thatthere's the supply and demand
(12:46):
market is there.
We need B, we need to make surethat there's enough affluence
that the people can afford ourproduct.
We need visibility, we needadjacency to high-end retail, we
need adjacency to high-endhomes, et cetera, et cetera, and
so we kind of will then funnelit down to a sub-market that we
think works and it's usuallywithin a three or five mile
(13:08):
radius.
And then it's kind of old schoolland sourcing.
It's working with localcontacts, it's working with
local brokers, local architects,local civil engineers, local
land use attorneys and going outthere.
And sometimes it's just it'svery old school and it's just
getting in your car and youdrive the market and you see a
(13:28):
site that maybe just doesn'tseem to fit and doesn't seem to
make sense, or you see thevision of a property or of the
future committee community onthat site and you try to tie up
that land.
So we're we've been verysuccessful at that.
As I mentioned, we've builtsenior housing communities
across the United States in highbarrier to entry markets.
We've got communities fromPortland Oregon to Portland
(13:50):
Maine and from Florida andCalifornia and everything kind
of in between, and we've hadsuccess going to each and every
one of those markets neverhaving set foot in them
previously, and have been ableto find really A-plus sites in
A-plus markets using that model.
But, as I mentioned earlier,operators involved in every one
(14:12):
of those decisions.
Speaker 2 (14:13):
That's correct, and so they're also using, you know,
NICMAP Vision, most of them toidentify areas that they want to
go into.
So big plug for Nick MattVision, Kyle Gardner what
they've accomplished over there.
It's funny.
I think we started with VisionLTC back when they were just two
(14:38):
guys right and working withthem to give us the data that we
really needed, and one of theareas that we really needed was
understanding of all licensedbeds in a marketplace, Because
what happened is that theconsultants out there were using
demographics data, but whatthey didn't understand is that
(15:00):
there's a lot of licensed bedsin the marketplace that are
under 25 beds, and so just inthe Denver area, we can state
basically around 40% of alllicensed beds are in communities
that are under 25 beds, and sothe ability to understand all
licensed beds is extremelyimportant in the marketplace.
(15:22):
How have you addressed that?
I mean this is kind of gettinga little bit off, but how do you
address that marketplace wherethere's bed counts of eight
licenses in a home or 12licenses or 15 licenses that
aren't being counted in typicalconsultants?
Overview of marketplace.
Speaker 1 (15:42):
Yeah, so when we pull all the data for a sub-market,
there's kind of two bucketsthere's the competitive units
and the non-competitive units,and so what we are delivering is
really a high-end kind ofluxury senior housing product
that's independent living,assisted living and memory care,
and so we have to go and thenwe could just look at the total
(16:05):
supply and, and you know, factorthat into the demand, and but
that's not really the best wayto look at it, because what
you're also dealing with is notonly the smaller mom and pops
that have, you know, eight beds,20 beds, 30 beds those are not
true, true competitors, right,and so we don't, we will factor
those down because I think it'sa different resident profile.
(16:26):
What we'll also do is look atthe age of the building.
If the building is 30, 40, 50years old, also we'll probably
factor that down some percentage.
So we get to a true unmet beddemand.
(16:47):
Just one extra level ofconservatism that we put in
there is we want to make surethat our projects will not be
capturing any more than 30% ofthe total unmet bed demand in
the sub-market.
So that basically tells me thatif we were to move forward and
invest the pre-developmentdollars, take down the land, put
all the effort that goes intothese buildings.
Two more projects could come inbehind us and we still believe
(17:08):
we would be successful.
So it's just another bufferthat we give ourselves there
when we go into a sub market.
Speaker 2 (17:30):
So, matt, I'm curious how do you identify different
subsets of nationality?
As you know, this country isbecoming very diverse,
especially in Houston and NorthDallas.
I was just at a Rotary, one ofour Rotary meetings, and the
superintendent for Frisco ISDstated that 43% of all children
in the school system are Asiandescent.
So how do you factor in thatgroup of high net worth,
(17:53):
potential high net worthindividuals with parents that
tend not to go into seniorliving?
But when we do our studies wesee the unmet demand in the area
.
How do we factor in that sideof the equation or how do you
factor in that side?
Speaker 1 (18:10):
Yeah, that one can be a little tricky because you can
get lulled to sleep with highunmet bed demand numbers because
of the population, and so, yeah, that's another thing we look
at and I think this should bethe takeaway for anyone
listening you can't just look atthe data and just make a brush
decision.
Oh look, there's 100,000 peoplein a three-mile radius.
(18:33):
We're going to go do this dealwhatever.
You got to dig deeper.
You got to go into the actualthe inputs and so like, if we
see a market that has high inthat demand, we're going to look
at that.
And we're going to look at thedemographics and, frankly, there
are some populations that justhave not adopted senior living
yet and so we have to factorthat in adopted senior living
(18:55):
yet and so we have to factorthat in.
There have been markets thatwe've gone to that have a
population of people that justwe know that they just have not
accepted or have not adopted thesenior housing model yet and so
we will walk away from thatmarket just knowing that that
unmet bed demand probably needsto be factored down by 50%, 75%
based on our knowledge of thespace.
But I think that it's changing.
You also kind of got to look at.
(19:16):
You know, it's just firstgeneration, second, third,
fourth generation, and as youget into further generation,
those I think as you adopt kindof the culture of the United
States and start to adopt maybethe senior living model, I think
that we can get morecomfortable with that.
So definitely more nuanced.
Speaker 2 (19:38):
Awesome, thanks.
I appreciate that answer tothat.
And so what are you seeingright now?
That are the key opportunitiesand obstacles for developers and
investors right now.
Speaker 1 (19:51):
Yeah, I mean this probably won't be a bright
insight that no one's talkedabout before, but the supply and
demand or environment thatwe're heading into is, I think,
a once in a lifetime opportunityfor the senior housing space.
You know supply has beendropping since 2017.
You know 2017, it was just, youknow, we just kind of got
(20:13):
overbuilt 2020, we got thepandemic 2021-22, we have the
interest rate run up andbasically the banks pretty much
stopped lending.
So the amount of supply hasbeen dropping for the last seven
years and, in the meantime,that baby boomer wave that this
industry has been talking aboutfor decades is actually here.
(20:36):
Uh, we are kind of at the no uh.
You know, you look at a wave.
We're at the node, right at thebase of the baby boomer wave.
I think 10 000 people areturning 80 every day.
So it's here.
You know, we've been talkingabout it, we've been waiting.
So, as challenging as the lastfew years have been and they
have have been challenging fornot only the senior housing
space but also for commercialreal estate, which has been
(20:59):
affected heavily by the interestrate run up we find ourselves
in this perfect storm of supplyand demand.
I think there's going to besuch an opportunity that once
the development capital frees upagain, which we're starting to
see it's starting to thaw.
The 50 basis point cut by theFed a couple of weeks ago was
welcome news.
It wasn't an on-off switchPeople aren't throwing me bags
(21:23):
of money just yet but it'sdefinitely it was a good
indicator that things arechanging.
So I think when that happensand development capital starts
freeing up again, I think you'rejust going to have an amazing
opportunity to capitalize onwhat I think is just going to be
, as I said, aonce-in-a-lifetime opportunity
where demand is surging andsupply is just meaningfully low.
(21:46):
There is going to be a verylimited amount of new quality
product and so really excitedabout our portfolio that we
currently have.
So you know, this supply demandenvironment does a couple of
things.
It helps with the occupancy ofall the communities that have
been struggling since COVID I'mgoing to try not to say COVID
(22:06):
more than once in this podcast,but they've been trying so
occupancies are coming back upto to pre pandemic levels.
Margins are increasing as well.
So I think it helps with that.
And then I think there's just tobe a great opportunity so that
if we can get in the ground withnew communities here in late 24
, 2025, I think there's justgoing to be a great opportunity.
(22:29):
I think we're going to startseeing cap rate compression come
back down to be a morenormalized investment cycle and
I think you're going to seevalues increase and I think
newer communities coming out ofthis will be.
I think there will be a lot ofpotential future buyers that are
going to be willing to reallypay up for high quality
(22:52):
communities in hybrid entrymarkets with top-tier operators,
and really that's what we'refocused on right now.
So I think that's one of thegreat opportunities.
I firmly believe in theopportunity of the active adult
space.
We've been evaluating activeadult for Gosh.
We looked at it probably 5 or 6years ago, decided it wasn't
(23:12):
the right time.
Gosh we looked at it probablyfive or six years ago, decided
it wasn't the right time,launched an active adult
business plan about two yearsago and are really beginning to
execute on that.
So we have about five sitesunder control that are currently
in early stages of design anddevelopment for active adults.
I think, that does a couple ofthings.
I think it allows us tobasically slide down the acuity
(23:33):
scale.
So we have typically done, youknow, assisted living, memory
care.
We have kind of found that ourindependent living assisted
living memory care communitiesare doing better.
So we're really focused on theon the continuum of care for our
senior communities.
But you know, the average agein a senior community is 82
years old.
The average age in a activeadult community is 72 years old.
(23:55):
So we see an opportunity to gocapture some of those younger
baby boomers sooner, get theminto the quote-unquote senior
housing space earlier, and wethink that's a great opportunity
.
I mean, if you look at it, Ithink there's 110,000 active
adult units in the countrycompared to 1.8 million units of
senior housing.
(24:15):
It's just that is completelylopsided.
That seems like there's areally great opportunity there
and so we're going to capitalizeon that.
So I think for the future,consul and Senior Living will be
probably 50% senior, 50% activeadult for the foreseeable
future.
So we're pretty excited aboutthat.
I think active adult also couldhelp solve one of the major
(24:38):
problems that senior housing hasbeen facing since I've been
here and long before, which isthat middle market that
currently isn't being served.
So active adult provides a moreattainable product.
That is kind of an entry pointto senior living.
It doesn't solve all theproblems but it certainly helps
get people in.
You can start bringing in homehealth care.
You can start to service someof those older adults as they
(25:02):
start needing some assistance.
So that's the opportunities.
I think the opportunities arevast.
There's lots of opportunitiesI'm excited about.
I think it's a really fun timeto be in the senior housing
space.
We paid our dues over the lastseveral years and I think it's
about time to start having somefun again, which we're looking
(25:24):
forward to.
But, that being said, there arestill obstacles that we need to
overcome, Obviously, justcapital availability in general.
Both debt and equity arechallenging and I think that's
driven.
Cost of capital is up.
That will hopefully startcoming down as we enter a Fed
rate-cutting cycle.
(25:44):
But also there's still a lot ofdistressed assets out there and
I think that's due to whetherthat's due to fund life, whether
that's due to debt maturities.
I think there's still a lot ofacquisition opportunities out
there, and so we have seen thatmost capital, sophisticated
capital that understands thesenior housing space understands
(26:04):
that they can still go out andacquire existing assets for
below replacement costs.
So it's hard for them to shifttheir mind over to development
capital right now because thereturns on the acquisitions are,
frankly, they're gettingsimilar to development returns
right now.
But I don't think theacquisition pool is going to
(26:27):
last too long.
There will still always beopportunities.
There'll always be distress,but I think that window is
closing.
It may take another 12, 18months for it to close to a more
normal cadence, but I thinkafter that, forward-thinking
(26:47):
investors are going to look atpast that acquisition window and
look at the development window,and I think that's coming.
We're already seeing a lot moreinterest in development deals
that we have in the pipeline,and so we're looking forward to
to basically getting thosegetting in, those those in the
ground, sooner rather than later, to to really capitalize on
that supply and demandenvironment that I was talking
(27:08):
about earlier.
Speaker 2 (27:10):
Yeah, it's, it's, it's.
You know, as, as I've stated inprevious podcasts, 806,000
units need to be built in thenext six years to cover the
demand in the marketplace.
That's over $300 billion worthof money that needs to be
invested in this space.
So tell me the structure thatyou go to the marketplace with
(27:33):
when it comes to attracting debtand capital.
What's your capital stack looklike for a typical development
that you're involved in?
Speaker 1 (27:43):
Yeah, well, we're going to kind of have to look at
that and what it was and what Ibelieve it's going to be, so
typically it has been.
We have dealt almost solely withultra high net worth investors.
So you know we are owned by anultra high net worth family, we
partner with them and other youknow high net worth families and
(28:03):
that is typically how we'vegotten I think almost all of our
deals done to date.
We have done one institutionaldevelopment deal and it went
well, but typically we have justkind of focused on our ultra
high net worth and that's workedout great.
Where I think we're going andkind of what I'm calling
Confluent 2.0, which I think isjust the next phase of this
(28:24):
company, I think we're going tobe focused more on some of those
larger institutional investmentpartners, reason being the deal
sizes are just getting largerand, as I mentioned earlier,
we're focused heavily onindependent living, assisted
living, memory care.
If you look back at our earlierportfolio, we were doing 60, 70,
(28:47):
80-unit ALMC deals and thosethings are great.
But those are smaller equitychecks.
Those are smaller deals, mucheasier to capitalize.
If you move into the largerbuildings, if we're going to do
a true IL, al and C building andyou want to do it right, we
believe you have to have aminimum of 60 to 80 IL units,
probably 40 IL units and 20 to30 memory carry units.
(29:09):
Well, your deal size justtripled, if not quadrupled, from
what previous deals we havedone.
So those equity checks getlarger.
So I think we're going to seeus working with our high net
worth, will still be involved inthe deal, probably more in a GP
structure, but we'll be lookingfor more of those conversations
(29:31):
right now and excited to launchsome of those new programmatic
relationships to reallycapitalize on this pipeline.
I haven't mentioned it yet butour pipeline currently is a
little more than $700 million indevelopment deals.
That is the largest pipeline wehave ever had.
We've been strategicallybuilding that for the last
(29:53):
several years in anticipation ofthe recovery.
Speaker 2 (30:01):
So of that $700 million, what is the breakdown
as it relates to active adult,AL, memory care, continuing care
communities?
What's that breakdown in yourdevelopment pipeline Sure?
Speaker 1 (30:18):
So I've probably got two projects that are just ALMC.
You know, call that $100million ballpark.
I've got two senior projectsthat are IL ALMC with cottages.
That's probably in the $300plus million range between those
350 million, between those twoprojects.
And then I've got four or fiveactive adult projects that are
(30:43):
75 to 100 million.
So it's pretty.
It's about half and half,probably still a little heavier
to the senior right now.
Just because that space we'vebeen playing in for so long and
as we continue to add activeadult deals, deals to our uh, to
our pipeline, that'll continueto grow.
But, like I said, I anticipatewe'll be in that 50 50 range
moving forward.
Um, so yeah, still believe inthe senior housing, traditional
(31:05):
senior housing space, but Ibelieve just we're really just
extending it into that activeadult space as well so matt.
Speaker 2 (31:12):
Define adult we get this question quite a bit from
our community.
Define active adult and then,if you can go into, what do the
seniors in the active adult sidewant in a community?
What's being designed today?
What space requirements arethey requiring?
As I've heard in the past,individuals considering active
(31:37):
adults are having to downsizefrom their homes where they have
a bit of stuff, and so what arethey looking for today?
Speaker 1 (31:46):
Okay, yeah, absolutely so.
Active adult.
Yeah, that's been the challengewith the space right.
What is it?
Because I think there'sactually a range of what it is.
You've got all the way on thelet's call it to the left.
You've got your aisle lightright, which is very similar to
independent living, maybe not asmuch care.
(32:06):
You've got dining.
You've got some of the thingsthat feel independent.
That's kind of on the far left.
On the far right you've gotbasically just a senior
apartment with nothing.
It's just market rate, but withan older population.
So some people define activedevelopment differently.
I think it's.
You know.
My definition is basically it'svery similar to a market rate
(32:26):
apartment.
It's very community focused.
I look at this as I want tobuild a vertical neighborhood.
Right, you want it's going tobe larger units, so that those
people are downsizing from ahome they've probably lived in
for 10, 20 years.
They've got all their stuff.
They're going to have achallenge moving down to a 500
square foot apartment.
They don't want that.
(32:47):
So we're focused on onebedrooms, two bedrooms, even
three bedrooms.
These are larger units than youwould see in a typical market
rate community.
We're going to have a lot ofactivity space, you know.
So it's.
It's a display kitchen, it'swhere you can take cooking
classes.
It's art rooms, it's gyms, it'syoga, it's pool, it's, you know
, room for card games.
It's a lot of multi-purposerooms where people can have
(33:10):
larger gatherings.
You can have an ability tobreak the rooms up with dividers
so that you can have differentactivities.
I think the key to me forsomeone to be willing to pay the
premium for an active adultunit over a typical market rate,
you have to have a sense ofcommunity.
They have to want to be there,they have to want to leave their
(33:31):
home to go and live with peoplethat are, you know, like-minded
, at a similar phase of lifeMany retired, some still working
, whether that's part-time orvolunteer, but they really want
to have an active lifestyle.
I mean, frankly, you know, areason to get up in the morning
and to go and live out the bestyears of your life, the golden
(33:55):
years of your life, with, withpeople in a similar, similar,
you know, point in the cycle.
So I think that's a big, heavyfocus.
It's quality Uh, it's, you knowit's we're going to focus on on
the higher end side of things,not not luxury, you know, ritz
Carltonton, four Seasons, butstill attainable, but make sure
that it's good quality that willattract those folks out of
(34:16):
their homes.
And similarly for the seniorspace.
I think it's like I mentioned.
We're heavily focused on IRA.
Omc Cottages is a big part ofwhat we're doing in the future,
if the land is available, justbecause we see that as another
diversification of product typebut also just an entry point for
residents who might not bequite ready to move into a
(34:37):
vertical senior housingcommunity.
But really it's just bothsenior and active adult.
We're focused on socialwell-being, just overall
wellness.
We're focused on recreation.
We're focused on just a senseof community that I think we all
as humans strive for.
I think that's just going to bedriving every decision that we
(35:01):
make For active adults.
I think the simple answer for alot of people is there's no
dining.
You know we may build out agray box of kitchens that give
us some versatility in thefuture if we need it.
But in general it's going to bemore focused on kind of the
community and the lifestyle forthese future residents.
Speaker 2 (35:22):
Well, thanks for that answer.
That's an extremely importantanswer because there is that
misunderstanding in themarketplace between IL and
active adult, and I can give anexample my mother lost her
husband to dementia and age andwent into a 55-plus community
(35:44):
and just loves it.
I mean, she told me the otherday she was down watching the
football game with eight otherpeople.
And so I feel both, on one hand, the importance of community,
but also mental health.
We as human beings are meant tobe in community with each other
(36:06):
, and so your part in developingactive adult, I believe, is
extremely important for seniors,and the need to get out of the
home where you're isolated,potentially maybe living alone,
to come into an active adult andbe thriving and being involved
(36:31):
in activities and other people'slives is extremely important.
So thank you for what you'redoing on that side, matt, you're
confluent.
Speaker 1 (36:37):
Yeah, yeah, I would actually add to that.
You know, as I mentionedearlier in our conversation, you
know I've worked in.
You know various facets ofcommercial real estate I've
worked in.
You know mixed use, multifamilyland, home building, asset
management, entitlements acrossthe board, senior housing and
(37:00):
active adult is such a greatspace because you get to do all
those things, you get the joy ofcreativity, you get the joy of
building a tangible asset.
But the one thing that I didn'tmention is walking into a
senior housing community or nowan active adult community that
you've developed and you canwalk in and see and hear and
frankly feel the livelihood thatthis community brings is maybe
(37:24):
one of the biggest rewards thatwe get from building these
communities.
You know I talked about ourentitlements team.
Our entitlements team is on thefront end, right, so they get
the project entitled and thenthey kind of move on to the next
deal after they've done theirjob.
And so I've made a point tomake sure that our entitlements
team and our construction teamare going back and visiting the
community six to 12 months afterit's open to see what it feels
(37:48):
like, and I think that's kind offuel for them to keep going in
challenging times.
You have to walk into acommunity.
I'll never forget we took oneof our entitlements guys to a
community.
We did it down in Memphis andhe walked in and you couldn't
wipe the smile off of his faceCause he's just amazing.
Like I worked so hard.
I worked so hard on thisproject, but it was five years
ago and now I get to see.
You know, it's just it, it'salive, it has a pulse.
(38:10):
These people are happy andlaughing.
It was like 10.30 in themorning and the place was
buzzing.
It's something that getsglossed over.
Oftentimes we're all movingquickly, we're all on to the
next deal, but sometimes youjust got to pause and remember
why we are doing this, and Ithink that's an important factor
.
Yes, we all want to make aprofit for our investors.
(38:32):
We want to make profit forourselves and for our families,
but to be able to do that whilesimultaneously improving the
lives of people that we franklyowe everything to.
They have invested in ourcommunity, they've invested in
this country, and to be able togive back in sense and invest in
them is a really it's a greatreward that I don't think we
(38:55):
talk about enough.
Speaker 2 (38:57):
I agree.
So thank you for what you allare doing and continue to do.
So let's talk about theevolving needs of the seniors
and what you're doing in termsof development guidelines.
When it comes to technology,when it comes to integrating
community-wide internet,whatever that is, can you kind
(39:20):
of address those designstandards that you're now
employing?
Because I mean, as you know,it's just things are changing so
quickly, as I've stated in aprevious podcast, you know going
to, in three years, havehumanoid robots in our
communities.
So tell us a little bit aboutwhat you're thinking, matt, when
it comes to that future living.
(39:42):
That is coming on to us prettyquickly.
Speaker 1 (39:46):
Yeah, you said it.
You know, every time the phrasetechnology comes in in senior
housing, I kind of I can'tpretend to know what the future
looks like.
Right, but what I can do ismake sure that my building is
prepared to adapt to the future.
Like I don't know what thatnext technology is.
Technology is changing so fast.
(40:06):
You know, you look, you knowyou heard your previous
conversations, but you know chatGPT-1 and we're moving on to
chat GPT-5 or whatever it is.
One is just obsolete at thispoint, and that's how technology
is going.
I am a firm believer that thesenior resident of tomorrow is
not going to be happy with thesenior living community of today
, and I think the biggest changethat is going to be required is
(40:30):
going to be access totechnology technology that not
only improves their connectivityto their family and friends and
to, frankly, the outside world,but also technology that
improves their livelihood.
I think we're finding ourselvesin this what I'm going to call
(40:50):
kind of a health revolution inour country and probably across
the world.
But people are much more intune with their health.
People are much healthier now,they're living longer, they are
focused on longevity andsustainability for themselves,
and so I think technology thathelps with that is going to be
very important for thecommunities that I develop in
(41:11):
the future.
I find myself in a uniqueposition because, while I am the
developer and we are the ownerof these communities, I am not
the operator right.
We partner with operatingpartners, so I can, I can, I can
certainly influence some ofthose decisions, but oftentimes
it comes down to the operator,and so all of our operators are
on board when it comes to toimplementing technology that
(41:33):
helps with the livelihood andhappiness and sustainability of
our residents, and so I thinkwe're constantly looking at
things that do that.
Also the technology thatprotects our residents from
falls or for, frankly, elderabuse, or elder abuse or any of
these, you know, or elopement,any of these things that can
(41:56):
afflict some of our communities.
We're focused on ways toimprove upon that.
So, you know, I wish I couldtell you today hey, I'm
announcing this brand newtechnology that's going to make
Consulate Buildings the bestbuildings in the industry.
I can't say that.
All I can say is that we areconstantly evaluating new
technologies that will helpimprove the lives of our
residents.
Speaker 2 (42:16):
Awesome Thanks.
You know I ask that questionbecause you are involved, as you
said earlier in our discussion,on the minute details
associated with your project,and that makes me feel that
you're involved in what flooringgoes in, what do the walls?
What is the size of the rooms?
(42:38):
How are they put together toenhance individual senior lives?
So thank you for the answer tothat question, and so let's
pivot back to Confluent and whatare the key aspects of your
plan moving forward and how doyou envision the company's
growth in the coming years?
Matt?
Speaker 1 (42:59):
Yeah, I mean, as I mentioned earlier, our key plan
is kind of going back to thebasics, which is hybrid entry
markets, a-plus sites and A-plusmarkets, and we are being super
diligent on our site locationright now.
So land availability is muchbetter now than it was pre-2020.
(43:20):
See, I didn't say the C wordthere, I just said pre-2020.
Creative ways to do that.
But so landowners, there's notas much competition for sites
right now.
So we're being very selectivewhen it comes to the sites that
we, that we are putting undercontrol.
Uh, you know the, the pipelinethat I have uh is I would say
(43:41):
these are some of the best siteswe've ever done.
Uh, I'm going to, you know,give an example of our most
recent success.
We just opened a project in, uhjust out in Las Vegas.
Uh, just opened a project inLas Vegas, just opened it just
under two months ago.
We're 87% pre-leased on thatbuilding, moving in 20 residents
, moving them in as quickly aswe can, as quickly as our staff
(44:01):
can support them, withoutcompromising the quality of care
that we provide that site.
We looked at probably four orfive different sites in that
market, put a couple undercontrol, just never really got
quite comfortable.
We did the homework on themarket.
We knew where we wanted to be.
We knew the sub market, we knewthe cross streets, we wanted to
be.
So when a site presented itself, we jumped on it.
(44:24):
I was going reviewing itearlier.
We submitted an offer withinfive hours of getting a site get
get the site coming across mydesk, like we knew exactly.
And so when you, when you knowa market, you're diligent, you
are patient and disciplined,you're going to be rewarded, and
so we're.
We're doing that across thecountry.
So we're really focused onmaking sure that we get these
(44:44):
sites under control.
You know, not going to lie,pursuit dollars are at a premium
right now.
Like're being very diligent onwhere we spend our money, but
what we're doing is we're thisyear I think next year we're
going to start really hittingthe gas on development.
We've got a couple of projectsthat I'll be excited to announce
(45:18):
soon, and then I think 2026 andbeyond is going to just we're
going to just kind of blow thedoors off.
I think there's going to be alot of groundbacks and I think
we're going to get to.
You know the cadence that weused to be at, which is three to
four groundbreaks per year, butthese are going to be larger
deals, so hence, as I mentionedearlier, larger equity partners.
But that's really our strategyand we, frankly, have partnered
(45:42):
with really good landowners aswell.
Frankly, the deals that I have,the senior deals that I have in
my pipeline we've been workingon for two years, plus some
longer I think I've got onethat's five years and these land
sellers have been great andwe've had to have some difficult
conversations and we've had tohave.
They want to close but we can'tbecause we're just the market's
not ready yet.
(46:02):
So we've been able torenegotiate those deals and
extend the land closings out andwe've had great partners across
the board that have beenwilling to do that.
We haven't had to walk awayfrom a single deal because our
landowners have been willing towork with us and I'm looking
forward to, you know, to givingthat good call that we're going
to be closing on some of theseparcels sooner rather than later
(46:24):
.
Speaker 2 (46:26):
Great.
So if you were to pick the topthree states in the United
States that you feel that from2026, as you said, onward are
the top states that you salivateover, what would be those
states?
I know you're across the UnitedStates, but what are the top
three that come to mind?
Speaker 1 (46:48):
Gosh, that's such a hard question to answer Because
I think it's so nuanced, so I'mgoing to answer your question
kind of with a non-answer.
It's just so sub-market,specific.
What I can do is I can tell youwhere I am and where we're
heavily focused.
So we've got a very largeproject in Southern California
(47:09):
that I'm really excited about.
Now California can be scary forsome folks.
There's a lot of kind ofpolitical things going on there.
The taxes are super high.
You keep hearing about thismass exodus from California.
I think there are a lot ofpeople leaving California but
there's still people moving toCalifornia and there's still.
I mean, it's just the demand inCalifornia and the affluence
(47:31):
there is something that's hardto ignore.
So California, especiallySouthern California, is very
exciting to me.
Parts of Texas still veryexciting, and we talk about kind
of in-migration.
Lots of people are moving toTexas.
We have a very large projectunder control that I think we'll
be going to be breaking groundon next year in Texas.
That's a 250-unit project withIA, almc and Cottages.
(47:55):
That we're excited about.
And then so those are, you know, kind of the bigger markets.
But then we're also focused on,you know, what you call kind of
your secondary market.
So we have a project in KansasCity that we're really excited
about.
Kansas City, we have focused onits Midwest.
So you not your Southern smileor anything, but we've spent a
lot of time and energy andreally dug into the demographics
(48:18):
and the details to identifywhat we think is the best
sub-market in the SouthernKansas City market.
We have a site that's fullyentitled, ready to go
shovel-ready when the markettells us to.
We're going to pull buildingpermits and start building.
So I'm excited about that.
But yeah, I mean, I think theNortheast is very exciting just
due to density.
(48:38):
Florida gets me we have a coupleassets in Florida but it gets
me a little nervous.
There's just I've seen a lot ofdeals.
A lot of deals got done downthere in 2016 to 2019.
A lot of them are trading rightnow.
I'm finding I just think it's avery competitive market.
So I don't know if we'll bedoing a lot of deals in florida,
but really, if I had to pick,without picking a state, I'd say
(49:00):
kind of still focusing on thesouthern smile.
I think that's where you knowwe're seeing a lot of migration.
But but, that being said, thereare still pockets.
You know that if you go intomontana you can find a pocket
where they need a senior housingcommunity.
You know you just got to do thework and find it.
So we're pretty agnostic whenit comes to that.
Like, if there's an opportunityand there's demand and the
(49:21):
seniors need a new project,we'll evaluate it.
Speaker 2 (49:26):
Yeah.
So you know, I agree with you,Throughout the United States the
need is great, and so we havedevelopers calling our
consulting side of our businessat Avon Senior Investments to
run a needs analysis report.
What is the need in themarketplace?
Just real quick, what is it?
(49:46):
And that really helps those whoare looking to develop to get a
base of what they can expect inthat, let's say, 10-mile radius
or 5-mile radius or 7-mileradius.
So I agree with Matt, the needis enormous out there, and so
let's you know.
(50:06):
One more question, and thenwe'll want to know how
individuals can get in touchwith you.
What are your needs?
What would you like to say toour audience out there?
But, looking ahead, what arethe key opportunities you see
for the senior living industryand how is Confluent positioning
itself to capitalize on thoseopportunities?
Speaker 1 (50:29):
Yeah, I think the key opportunity is, once again, the
supply and demand.
Uh is just something you can'tignore.
Uh, you can't ignore it, it'sthere.
It takes I've used this phraseI probably stole it from someone
a couple times, but since I'vesaid it a couple times, I'm not
going to say that it's mine butit takes capital and courage, uh
, to to move forward withdevelopment at this time, and
(50:50):
that's what we're focused on.
We absolutely have the courage,we have the capital.
We're looking to expand ourcapital relationships moving
forward and I think you know wehave built the pipeline
strategically to take advantageof this environment.
I don't know many groups thathave a pipeline as large as we
do with A-plus assets that we do.
So we've really we haveinvested time and
(51:12):
pre-development dollars topursue these assets, so we're
ready to go.
We think, you know, while themoment might not be today, it's
closer than we all think andwe're really excited about that.
We're going to capitalize on itand really, the opportunity.
We have partnered with, Ibelieve, some of the best
operators in the country.
We have really diversified ouroperating relationships.
(51:33):
We have covered the UnitedStates strategically with really
four operating partners that wework with, and so when a site
presents itself in a market thatwe look, we know exactly who
we're going to talk to aboutthis, and so we have the entire
United States covered with ouroperating partners.
We have the entire UnitedStates covered with our
operating partners.
(51:53):
You know, we have the expertise, we have the knowledge and we
have the, frankly, the courageto go and execute on this plan
and I'm looking forward to doingit.
Like I said, the last few yearshave been extremely challenging
.
Not going to sugarcoat that atall, it is, it has been.
It is this is a tough industry,even the best days.
But it's even harder whenyou're not putting as many wins
on the board.
(52:13):
So we are really excited forthe fun to get put back in this
business and start putting winsback on the board, putting pelts
on the wall, so we're reallyexcited about it.
Speaker 2 (52:25):
So if you want to let our audience know, we have
individuals that are also highnet worth individuals listening
to this podcast.
We have institutional investors, we have the REITs and others
listening.
What do you need, what doesConfluence need from the market
when it comes to capital, andwhat kind of checks are you
(52:46):
looking for to come into thesedevelopments that are in the
pipeline?
Speaker 1 (52:51):
Yeah, I mean due to the size of these.
Once again, I think what we'vetypically done in the past is
Confluent has funded all of thepre-development dollars and
that's kind of part of the valuethat we have added.
As these deals get bigger,that's a little more challenging
to do.
So when you're talking aboutfunding, you know each project
is $3 million to $5 million ofpre-dev.
So I think we're looking forsomeone to come in and commit to
(53:13):
the deal early.
Commit to some of the pre-devdollars, not all of them, but
that would be our ideal equitypartner and, frankly, we're
comfortable with a moreprogrammatic relationship, with
pursuing multiple deals, notjust one-off deals.
I think we're open to that.
Pursuing multiple deals, notjust one-off deals, I think
we're open to that.
Typically in the past we haven'twe really enjoy the benefit of
(53:38):
being able to have as muchcontrol over our investments and
our future.
I think we're willing to giveup some of that control to
partner to make sure that we canexecute on all of these
projects.
I think that's going to take alarger institutional partner.
When it comes to deal size, Imean you mentioned earlier you
know the project in SouthernCalifornia is north of $200
million.
You know the one in Texas isnorth of $100 million.
(53:58):
Each of these projects, theprices are going up.
So depending on you know theloan to cost.
You know you could be talkinganywhere from $30 to $80 million
equity checks on some of thesedeveloping deals.
So we're not talking smalldeals anymore.
So we're also havingconversations about our current
portfolio.
We've got a portfolio of12-season assets, so what should
(54:24):
we be doing with those as well?
We've got some strategicone-off sales that we're working
through currently, but theremight be a larger and more
strategic play in place as well.
Speaker 2 (54:38):
Well, harrison Street just announced that they raised
over a billion dollars fortheir senior living fund.
So there's money out there andit's a very exciting time to be
in this space for at least thenext.
I only look maybe five, tenyears, five years because it's
changing so rapidly, and so fiveyears a very exciting time, and
(55:02):
so I really appreciate youbeing part of this podcast today
, matt, how do individuals getin touch with you that want to
write those big checks to you?
Speaker 1 (55:15):
Yes, you can just write the checks to Matt Derrick
Just mail it to my house, I'msure.
I'll make sure it gets where itneeds to go.
No, in all seriousness, you canjust email me at mderrick at
confluentdevcom.
I'm not sure if you want to putthose in the show notes or
anything, but happy to do that.
Or you can just go toConfluentDevelopmentcom.
(55:36):
I want to make sure that I getthat web browser right.
Make sure I got that.
Yeah, it'sConfluentDevelopmentcom.
Speaker 2 (55:48):
Yeah, and then just go click over onto the senior
living side of the site andyou'll see what their portfolio
looks like.
And I can attest you areworking with the top operators
in this space.
And congratulations to yoursuccess, matt.
At a very young age, you'vedone a tremendous amount in this
(56:09):
space.
So congrats to Confluent andwhat you've done.
I look forward to reaching outto you as we build our
intergenerational longevity andwellness communities across the
United States here in the future, to have you part of that
development, part of it.
And so thank you again andappreciate you being part of the
(56:32):
show and have a great day.
Speaker 1 (56:35):
Yeah, thank you.
Thanks for having me Reallyappreciate it.
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