Health Care and Utilities and Real Estate & Retail

Ex-Duke exec, wife tackle senior housing: Horns have nationwide plans for The Stratford Cos.

October 22, 2007

Richard and Wendy Horn have had their share of separate real estate successes. Now, they've combined their corporate talents as a husband-and-wife team to lead an upstart senior housing developer.

Richard joined The Stratford Cos. in May 2006 as chairman and CEO, and has since moved its headquarters from St. Louis to Indianapolis' north side in Parkwood Crossing.

He is known within commercial real estate circles as a former veteran of Duke Realty Corp., where he enjoyed a two-year stint as president of the Indianapolis-based real estate investment trust that boasts properties in 19 cities.

As chief marketing and business development partner, Wendy leads Stratford's sales efforts. Her career in senior housing began in 1984 with the locally based Forum Group Inc. It was a publicly traded operator and developer of luxury senior housing, assisted-living and nursing facilities in 13 states before its sale to Marriott Corp. in 1996.

Combining their efforts in the real estate development and senior housing sectors should provide Stratford with enough heft to achieve similar success. Those who know Richard, particularly from his days at Duke, wouldn't bet against it.

"It always seemed to me that he had a clear vision," recalled David Reed, who spent 10 years at Duke before becoming managing director of CB Richard Ellis' local office. "I think he will be successful because he has the mind-set of always doing the right thing for the client, and that will play well for him in this arena."

Besides St. Louis, Stratford has developments in Denver, Cincinnati and, locally, the Stratford at WestClay across from the upscale Village of WestClay in Carmel. The $65 million project that should be finished in March features 215 units to accommodate seniors who live independently as well as those needing assistance.

Stratford has options on parcels of property in two other major Midwestern markets and initially aims to undertake two to three new projects every year. An aging population is driving demand in an industry hurt by overbuilding and mismanagement in the 1980s and into the 1990s.

The return of the capital markets and institutional investors into senior-living facilities further underscores the rebound, said David Schless, president of the Washington, D.C.-based American Seniors Housing Association. Stratford has leveraged a total of $250 million in investments, for instance.

"The industry has produced a lot more data that is really comparable to data you would find if you were to invest in apartments or hospitality," he said. "The comfort level is there, and it clearly wasn't 10 years ago."

Betting on WestClay

Richard joined Duke fresh out of law school in 1984 as a leasing representative. By 1995, he was in charge of the Midwest office group, taking the company into the St. Louis, Cleveland, Chicago and Minneapolis markets.

He was appointed president, the company's second in command, in 2000, but left two years later to join Carmel-based Brenwick Development Corp. He soon left Brenwick to found Horn Properties LLC. The developer's portfolio of mixed-use commercial parks includes the 56-acre MetroAir Business Park in Plainfield.

Horn Properties also provides seed capital to startups. Its investment early last year in Stratford helped launch the West-Clay senior living development, as well as the Horns' leadership in the company. A few of Stratford's founding partners remain in St. Louis.

"We thought the Village of WestClay was a unique neighborhood where we can build a retirement community within the community," Richard said. "We're making a bet that the community will embrace it."

Brenwick is the mastermind behind the Village of WestClay, a 680-acre mixed-use project featuring old-fashioned architecture and quaint surroundings. The upscale ambience of the senior housing complex, known within the industry as a continuing care retirement community, complements the affluent stretch of residences just off 131st Street.

Stratford retirement communities normally offer several housing options and a wide range of services, amenities, and health and wellness programs.

The 8.6 acres purchased by Stratford west of Towne Road will contain 172 penthouses, apartments and bungalows for independent seniors, and 43 assisted-living units.

The 40 bungalows will be detached from the Main Residence and Common Building. The independent- and assistedliving wings will have separate amenities and staff. The target demographic is the 70-plus population, although residents as young as 62 will be welcome.

Upscale prices

The apartments and penthouses will range in size from one to three bedrooms and 750 square feet to 3,200 square feet. Prices start at $167,000 and must be paid upfront. Unlike traditional homeowners, who can profit from appreciation of their homes, residents of the Stratford at West-Clay are refunded up to 90 percent of the "entry fee" upon vacating their units. A rental option also is available.

While the refundable fee may seem unusual, it is typical within the industry, said Schless of the ASHA. And it doesn't seem to be a deterrent, as roughly half the units at Stratford already are sold.

CICOA Aging & In-Home Solutions, a local senior-living advocacy and services group, recognizes the need for additional senior housing. Duane Etienne, president of the organization, predicted the West-Clay project will fill a niche, although he'd prefer to see more developments targeting the low-income population.

"Developers are really seeing a market," he said. "People like me are looking to downsize and looking for housing that is more senior-friendly and more accommodating as they get older. I think they'll be very successful."

In this case, the accommodations include numerous amenities such as dining facilities ranging from a formal to casual restaurant, as well as a private dining area.

An indoor pool and Jacuzzi, fitness center, salon and day spa, billiards and clubroom, and a theater, Internet cafe and library are available, too.

In addition to the upfront fee, residents pay $2,000 a month for meals, housekeeping, utilities, underground parking, association dues, security and other services such as access to wellness programs.

"You cannot buy the support out of your home that we provide," Wendy said, "no matter how affluent you are."

Room for growth

Nationally, the senior living industry is quite fragmented. Its players range from the luxurious Classic Residence by Hyatt to the publicly traded Brookdale Senior Living Inc., both based in Chicago, to scores of not-for-profits and church-sponsored programs.

In Indianapolis, the nearest continuing care community to Stratford's project is the 25-year-old Marquette Manor at 86th Street and Towne Road. But Virginia-based Sunrise Senior Living Inc. is said to be contemplating a development in Carmel.

The increase in elderly housing corresponds with the nation's aging population. Developers have a better understanding of those they serve and are less likely to repeat mistakes that crippled the industry in the 1980s, experts said.

Developers, armed with statistics showing that the 65-plus population would double in 35 years, rushed in with a "build it and they will come" mentality. But many projects were too expensive, too large, built in isolated locations, or didn't offer health care services. A lack of experience and undercapitalization left many developers bankrupt, lenders bitter and consumers skeptical.

Despite the rebound, there's still room for growth, said John Sharpe, a lawyer at Indianapolis-based law firm Sommer Barnard PC who is general counsel of the Indiana Assisted Living Association.

"There's been a lot of building over the past five to eight years," he said. "But in high-income areas, it's still going pretty strong-witness Stratford."
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