The Cardinal, the retirement community that Kane Realty once hoped to build in Raleigh’s North Hills, has been given new life by Kisco Senior Living.
The Carlsbad, Calif.-based company notified the state Department of Insurance in April that it planned to build a scaled-back version of the project, and late last month began accepting $1,000 deposits from those interested in reserving units in the community.
About 60 people have put down deposits so far, said Mitch Brown, Kisco’s chief development officer.
The project is a joint venture between Kisco and Health Care REIT, an Ohio real estate investment trust that had been Kane’s financing partner on the original deal. Health Care REIT owns a six-acre parcel on the east side of Six Forks Road adjacent to the Park & Market apartments, and has the right-of-first-refusal on a 1.5-acre adjacent parcel.
Unlike Kane’s proposal, which called for residents to pay entrance fees ranging from $367,000 to more than $1 million, Kisco’s Cardinal will be a rental model. To secure a residency, a resident would have to put up two months of rent and service fees.
The Cardinal will still be a continuing-care retirement community, meaning it will offer a range of medical services that let residents stay in one place as their needs change. Kisco has reduced the number of independent living units from 202 to 160. It will also have 60 units for assisted living, nursing care and memory care for residents suffering from dementia or Alzheimer’s.
The state regulates CCRCs to ensure that residents receive proper care and that the projects are financially sound, and the revised Cardinal proposal is considered a new project by state regulators. Projects must move through a three-step process before construction can begin, with the final step being a preliminary certificate.
Kane Realty never received a preliminary certificate for its proposal as the Department of Insurance made a series of requests for more information before the application was pulled in October 2010. Kisco is currently working on the second phase, called a startup-up certificate.
Brown said, depending on the pace of residents putting down deposits, Kisco hopes to break ground in the second or third quarter of next year, which would mean completion sometime in late 2014 or early 2015. Kane’s original proposal for The Cardinal called for Duke Raleigh Hospital to operate a wellness and fitness center on-site. Brown said Kisco plans to operate its own 35,000-square-foot clubhouse and fitness center, but the company has had preliminary discussions with Duke officials about working together.
The involvement of Kisco and Health Care REIT – two of the most experienced and deep-pocketed players in senior living – in The Cardinal is a sign of just how attractive the Triangle market has become for real estate developers that target affluent seniors.
Kisco has developed three retirement communities in the Triangle: Abbotswood at Stonehenge and Magnolia Glen in Raleigh, and Woodland Terrace in Cary. Last week, the company sold Magnolia Glen to Health Care REIT for $59.96 million. Health Care REIT is also acquiring four more Triangle communities as part of its $1.3 billion acquisition of Sunrise Senior Living.
What remains to be seen is whether there will be enough demand to absorb the new CCRC units that are likely to come on the market in the coming years. Many seniors finance the move into a CCRC by selling their homes, something that has become more difficult and less profitable in recent years.
And The Cardinal will face competition from The Cypress, an existing CCRC in North Raleigh that has sold all of its initial 205 units and has room for two more buildings, and SearStone, a 169-unit CCRC now under construction in Cary.
Brown said Kisco’s Triangle properties have performed exceptionally well over a long period of time, with Abbotswood, Woodland Terrace and Magnolia Glen all consistently having occupancy rates of 95 to 100 percent.
“We’ve done a number of very detailed market demand analyses, and we feel like the penetration rates and the market demand for this project are very good,” he said. “Otherwise we wouldn’t be doing this.”
Kisco also considers The Cardinal to be complementary to the other properties it has developed in Raleigh and Cary. Brown said it isn’t just the young who now want to live in vibrant urban settings.
“There’s a real growing consensus that elders don’t want to be isolated,” he said. “They don’t want to live apart from everything they’ve come to enjoy and love throughout their lives.”