Master Plan Task Force update
This document is for Lathrop residents, their families and friends, Lathrop staff, Kendal staff, and others interested in the evolution of a master plan for what we consider a special retirement community. We hope it will answer questions and help generate interest in the planning process. – Lathrop Task Force
In two words- a lot! Since the last update, the Finance Committee, Task Force, and Board have continued their work on the master plan and its impact upon Lathrop’s residents, marketability, financial stability and long term relevancy.
Investment Banking Firm and Initial Funding: On September 8th, the Task Force charged the Finance Committee with vetting investment banking firms to help guide the project’s financing process. After interviews in October, unity was found to engage Ziegler, a leader in the senior living industry, providing clients with capital raising, strategic advisory services, equity and fixed income trading, and research. This selection was affirmed by the Task Force and the Board at the end of 2016.
As the new year opened, Ziegler continued its conversation around financing options with the Finance Committee and then the Task Force. They recommended that Lathrop seek capital funds totaling $4.8 million to complete the refinement of the project, update market and feasibility studies, provide education for all stakeholders, complete design schematics, and obtain town and land approvals and permits.
These funds would primarily come from the issuance of Bond Anticipation Notes (BANs) that would be sold to a defined group of investors who understand the risks and rewards of this type of project. The BANs cannot be sold on a retail level, to residents, for example, due to how they are regulated in Massachusetts. The BANs would be unsecured without recourse, meaning that Lathrop would not be legally required to pay back the $4.8 million, should the project stall or fail. We would, however, be responsible for certain costs such as legal expense. The reason these investors collaborate to lend such seed monies is that they hope to ultimately benefit from a 10% return on their investment.
A comforting note: Those investors will take a risk only on worthy projects that are supported by a strong market demand and make sense financially in order for the organization to service its debt and remain viable. Ziegler affirmed that Lathrop’s relationship to Kendal is a distinct advantage and is attractive to investors, who know Kendal well and have invested in similar expansion and repositioning projects undertaken by other Kendal affiliates.
Consensus on a “Preferred Plan”: While the Finance Committee reached unity, concerns were expressed about the scope and size of the project, the notion of repurposing or replacing The Inn, the long term financial impact of increased debt, the plan’s ability to produce capital reserves, and marketability. Lathrop management, along with Kendal, DiMella Shaffer and Cutler Associates, reviewed the design elements of the Meeting House, Commons building and areas proposed for Memory Support and apartments, as well as the viability of alternate Inn scenarios.
On January 24, an amended project scope was presented to the Task Force with an eye to reducing the cost of the project. By eliminating underground parking for the new apartments, reducing the square footage of the Commons building, eliminating a stand-alone building for Maintenance, reducing the scope of Meeting House renovations and either postponing or removing the Memory Support neighborhood, a savings of $2.8 to $4.8 million could be realized. Further, the Task Force had a robust discussion regarding the architectural, financial and ethical issues of repurposing or replacing The Inn with a connected, but distinct Commons Building and apartments.
Members of the Task Force, DiMella Shaffer, Cutler, and Kendal reached consensus that to repurpose The Inn would be difficult from a construction perspective, the spaces that could be created would be inadequate to accommodate the capacity for additional townhome residents and would generally be more expensive. Of paramount importance was the desire to minimize disruption to the lives of Inn residents; repurposing the Inn would require residents to move at least two or three times. Thus, it was decided to recommend to the Board that the preferred plan, to construct a new Commons building and apartments in the Northwest field, be pursued.
Kendal Support: Directly following the Task Force meeting, the Board met to discuss the proposed recommendations, including raising $4.8 million in capital funds and to continue modelling the feasibility and financial impact of the preferred plan. In attendance was Sean Kelly, Kendal’s CEO, who offered a “friendly loan” to Lathrop in support of the project. Kendal has agreed to lend Lathrop up to $375,000 in seed monies, which will be paid back once the $4.8 million in BANs is raised. This is the first time that Kendal has invested in an affiliate in such a manner; typically, their support has been for development of new sites. Lathrop is grateful for the endorsement.
Risk Mitigation: The planning process has been designed to mitigate risk as much as possible. Besides careful planning and casting a wide net for ideas and wisdom among all stakeholders, the next phase of market study will update the competitive analysis and conduct focus groups, both internal and external. If the feedback about the expanded campus, and new amenities and services including wellness, enhanced independent living and memory support, is not substantially positive, then the Task Force and community will revisit and revise the plan. If, however, the updated market analysis and focus groups affirm the current proposed plan, then Lathrop will proceed with the remainder of the planning process.
A second method of risk mitigation is the plan to presell and take 10% deposits on at least 70% of the new units. If this proves to be a slow or difficult process, then the presell period can either be extended or the plan must be revisited and revised. Only after the 70% goal has been achieved will Lathrop then seek permanent financing for the entire project. Doing the construction in phases can be considered at that time if desired.
The decisions were shared with residents at meetings on each campus, on January 25th and 26th. The following is a summary of the plan status – good discussion ensued.
Decisions Made – Where There Is Unity
- Expansion is necessary for Lathrop’s financial viability and will occur.
- The expansion will be entirely on the Easthampton campus.
- There will not be a pool in the Commons building.
- Easthampton will fulfill its original commitment to the city to identify and officially conserve portions of its land.
- A modified renovation of the Meeting House will be the only change on the Northampton campus.
- A supportive apartment environment (like The Inn) will continue at Lathrop, located in a new facility.
- A memory support facility will be established at Lathrop, possibly phased in later.
- The maximum expansion will be 64 new town homes, 24 apartments for enhanced independent living, and 15 memory support units.
- Hybrid homes (two-story residential buildings containing more than one residence) will not be included.
- Implementation of the plan will provide for a capital reserve fund for maintenance needs and to weather market downturns.
- Seed capital of $4.8 million to start the project will be sought this spring.
Decisions to be Made – Where We Seek Input and Feedback
- How to continue trimming the estimated $46 million maximum expansion cost and still meet long-term financial goals
- Roadway locations and access. How do we maximize accessibility and preserve the landscape while we minimize hardscape surfaces, such as roads?
- Number and location of town homes. What is the “sweet spot” financially and operationally? How can we preserve/conserve the most land possible, such as the 40 acres now free of invasives?
- Scope and location of amenities. For example, if there is no pool, should a hot tub be considered?
- The nature of dining facilities to be offered.
- Proposed entrance and monthly fees for new residents.
- How the expansion can or will be phased. At what cost? At what benefit?
In the next four months, funds from Kendal and the capital raised by Ziegler will be used to:
1. Revisit all project assumptions including market demand and pricing, program, residency agreement type, project budget and schedule and financing options.
2. Conduct focus groups and update the market research.
3. Develop a marketing plan and a reservation list for new units.
4. Complete the schematic design by architects. To date, what have been produced are concept/idea renderings and placement holders to better understand the unit density in relation to wetlands.
5. Perform additional site planning and engineering and apply for applications for entitlements.
6. Close on seed capital funding.
7. Continue Task Force, Board and resident education, input and updates
In the next 18 months, Lathrop will:
1. Review and validate all underlying assumptions.
2. Implement the marketing plan.
3. Continue Task Force, Board and resident education, input and updates.
4. Complete construction-level architectural and civil plans.
5. Obtain land development approvals and permits.
6. Secure construction contract.
7. Secure 10% deposits on 70%+ of new units.
8. Close on permanent financing.
9. Begin construction.
We have come a long way, but there is still much work to be done. We look forward to ongoing discussion, and we very much welcome your insights and energy as we build on Lathrop’s mission to respond with respect and compassion to the changing needs of older adults in our communities.