Kayne Anderson, Watermark Senior Housing Site Slated for Early Spring Opening

Kayne Anderson Real Estate and Watermark Retirement Communities’ senior housing project in Brooklyn is slated to open in March 2020.  The private equity real estate firm joined forces with the Tucson-based senior housing operator to create a 275-bed retirement community in an undersupplied senior housing market.

“New York City as a whole is underserved because it’s been challenging to find buildings that could be retrofitted to deliver high-quality senior housing projects,” said Bryan Schachter, Director of Strategic Investments at Watermark, to REFI US.

Watermark was approached via an unsolicited website inquiry about a potential opportunity in early 2017.  The senior housing operator, which has 59 built communities across 21 states, hadn’t entered the NYC market but was willing to investigate the site.  Having partnered the Kayne Anderson before, the former Leverich Towers Hotel and Jehovah’s Witness dormitory at 21 Clark Street in Brooklyn Heights seemed like a fit.

“For a number of reasons based on physical makeup and history of the building, senior housing was the best use and we were the selected bidder for the property,” said Schachter.

The $330M acquisition closed in late 2017 and was funded via a $200M acquisition and redevelopment loan from BMO Harris, Wells Fargo and Capital One and $130M of equity from Kayne Anderson.  The Florida-based firm is the majority owner, with Watermark and The Freshwater Group acting as operator, co-developer and minority owner.  Tishman Speyer is also a co-developer, construction owner representative and minority owner.

The senior housing project, The Watermark at Brooklyn Heights, will have 275 residences divided between independent living, assisted living and memory care units.  The 310,000 SF property spans 16 stories and includes a rooftop terrace, garden and a Skyline club room to provide residents and visitors views of Manhattan and Brooklyn.

“We’re really looking at this as a unique setup in an area that’s very different than being in Manhattan but gives access to Manhattan and throughout Brooklyn.  We’re excited for our positioning from a pricing, amenity and location standpoint, and the location standpoint, and the location in Brooklyn is second to none,” said Schachter.

The senior housing gained much attention in the New York City market due to low penetration rates and high prices on a rental basis.  In many markets there is a large upfront entrance fee followed by lower monthly fees that put an artificial lid on new developments.  Another struggle has been the cost of redevelopment as many building types aren’t equipped for efficient senior housing projects.  However, in recent years there’s been a shift in the market demand as real estate players are willing to afford higher rental fees in the city.

“This is certainly at the higher end of our projects in our portfolio from a cost perspective as its location in New York City.  The high-end fit and finish is targeting strong rates, albeit competitive to the Manhattan and Brooklyn market,” said Schachter.

The high-rise property will keep its historical feel with visual improvements internally and externally.  Montroy DeMarco Architecture (MDA) is the Architect behind the project, Lemay+Escobar was tapped as Interior Designer with Hudson Meridian as Contractor.  The building will include around 50,000 SF of dining options, a library, fitness an wellness center an an indoor pool.

Source: Real Estate Fund Intelligence US