- September 6, 2021
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Updated: September 6, 2021 @ 11:00 am
The process of converting the former Winchester Memorial Hospital, 333 W. Cork St. in Winchester, has stalled but the developers are hoping to break ground in November.
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The process of converting the former Winchester Memorial Hospital, 333 W. Cork St. in Winchester, has stalled but the developers are hoping to break ground in November.
WINCHESTER — It has been nearly a year since work was supposed to begin on a new senior-living center at the former Winchester Memorial Hospital on West Cork Street. However, nothing has happened at the site and many residents are wondering what’s going on.
“I think we’re going to have some good news sometime this fall,” Andy Palec, who is managing the construction project on behalf of Healthcare Development Partners (HDP) of Chicago, said on Wednesday.
HDP announced in 2017 that it planned to convert the former Winchester Memorial Hospital at 333 W. Cork St., which it purchased in 2014 for $7 million, into a senior-living facility for 200-plus residents. Following seven public hearings spanning five months, City Council agreed on March 26, 2019, to endorse a conditional-use permit allowing the project to proceed.
Last September, Palec said HDP planned to begin renovations of the 3.7-acre site in October 2020, seven months after the COVID-19 pandemic arrived in the Northern Shenandoah Valley.
“We ran into some pretty serious headwinds in terms of financing,” Palec said on Wednesday, with many of the problems brought about due to the pandemic’s economic repercussions.
For one, Palec said, “A number of the lenders we had been talking to, their underwriting got incredibly difficult.”
He explained that senior centers and nursing homes were hit particularly hard by the coronavirus, which compelled many lenders to re-evaluate if they wanted to continue bankrolling senior facilities and how much they would be willing to let developers borrow.
Prior to COVID-19, Palec said, “You could borrow 75% of the cost [of a senior-housing project] and put up about 25% in equity. But the underwriting standards for senior living have gotten to the point where you can only get about 60% of the cost and need 40% in equity.”
Another roadblock, Palec said, was that lenders who were still willing to finance senior facilities didn’t want to offer loans for projects unless they were located in major metropolitan areas. Since Winchester is in what he described as “a tertiary market,” that added to HDP’s financing challenges.
“The other headwind that really hit us hard was construction costs,” Palec said, explaining that COVID-19 triggered significant increases in the prices of building materials such as lumber and masonry. “They’re starting to level off a bit, but the combination of underwriting standards for lenders, the few lenders that were still [financing] senior living and the higher construction costs have created serious difficulties in getting financing in place.”
The assorted obstacles and delays have significantly increased the estimated cost of the senior-living center on West Cork Street. The project was initially budgeted at $50 million, but Palec said that figure has risen to about $72 million.
Regardless, HDP is not walking away from Winchester. Palec said the company has directed its contractor to “hard bid” the project, meaning that subcontractors who want to be selected must provide guaranteed costs in advance. That will help avoid future problems that could arise if material and labor costs increase again.
“We’re bidding the job right now,” Palec said. “Pricing is due back on the 22nd of September.”
HDP is also investigating what Palec called “some creative capital strategies” that could bring in outside investors to help offset initial project costs.
“Some of those capital strategies are taking hold right now,” Palec said. “I think we’re going to have some better ideas [about the potential investment strategy] as we get a little more into the fall.”
As it currently stands, Palec said HDP hopes to break ground in November, but circumstances could push that date back.
“I’ll know better in about a month’s time,” he said. “We’re very committed to making this happen. We’ve got millions of dollars invested in it.”
Once work begins, Palec said, “we can move pretty quick because the building is 100% designed and engineered, we’ve submitted plans to the city for review and permitting, our contractor is engaged and ready to go and will have a guaranteed price for us on September 22nd,” Palec said. “We have every incentive to take whatever risk we can take to get into the ground this fall.”
As proposed, HDP’s senior-living center will include 107 independent-living apartments, 24 assisted-living dwellings, 34 memory-care units and in-house amenities including a spa, swimming pools and a beauty salon. Ongoing management of the center will be handled by Integral Senior Living, a California-based company that specializes in overseeing the day-to-day operations of housing complexes for seniors.
HDP will provide 373 on-site parking spaces, including 30 designated for handicapped parking, plus 20 overflow spaces in a downtown garage that will be accessed by a free shuttle. It will also offer free valet parking to residents, and share the cost with the city to build a new WinTran bus stop next to the senior-living center.
Palec said he has already been contacted by people interested in living at the new senior center, but it’s too soon to discuss monthly rents. In the next few weeks, though, Integral Senior Living plans to set up a phone line and website where people can get housing information and track the status of HDP’s construction.
“I think there’s probably a little disappointment that we aren’t already underway,” Palec said about the stalled status of the senior-living center. “We understand that, and I think the best way to build the public’s confidence is to get the project financed and start construction.”
— Contact Brian Brehm at bbrehm@winchesterstar.com
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