For such a young company, Horizon Bay Senior Communities has a track record of robust growth. The Tampa-based property management firm created in 2001 manages $2 billion in assets, including 12,000 units in 70 buildings. The number of managed units has grown 25% since 2003.

Horizon Bay has grown quickly by aligning itself with big investors — a strategy it plans to continue. It's also launching new developments. “We're opportunistic,” says Thilo Best, chairman and CEO at Horizon Bay. “The new properties help us to continue to grow our management company at a time when acquisition activity has slowed dramatically.”

Most of the company's managed properties (78%) are independent living apartments. Assisted living comprises 17% of the portfolio. About 99% of the properties are private pay. The company has 4,700 employees.

Key deals

Originally formed to manage the 6,000-unit seniors housing portfolio owned by Goldman Sachs & Co.'s Whitehall Real Estate Funds, Horizon Bay sold off 22 underperforming properties and renovated 13 others.

In 2004, Horizon Bay closed the sale-leaseback of Whitehall's $562 million portfolio to CNL Retirement Properties, now a part of Health Care Property Investors (HCP). Several other sale-leasebacks followed. In August 2005, Horizon Bay formed a joint venture with Chartwell Seniors Housing REIT, Canada's largest senior housing owner, to manage all of its U.S. properties.

In 2007, Chartwell purchased a 49% interest in Horizon Bay, which helps identify acquisitions for Chartwell. In sum, Horizon Bay now manages about $1 billion in assets owned by HCP and another $1 billion owned by Chartwell. Revenue under management last year was $370 million.

A long-time industry executive, Horizon Bay's Best was previously senior vice president of finance at Holiday Retirement Corp. He also served as chairman of the board from 1997 to 2005 at the National Investment Center for the Seniors Housing & Care Industries. He is currently an executive board member of the American Seniors Housing Association (ASHA) and a member of the group's public policy committee.

A handful of top managers have been with Best at Horizon Bay from the start: Steve Benjamin, co-president and COO; Jon DeLuca, co-president and CFO; and John Sattlemayer, senior vice president of facilities management.

Horizon Bay has previously held some ownership positions, so it knows how to generate the returns owners seek. “We are always looking for ways to maximize net operating income,” says DeLuca. “We don't just work for the [management] fee. A piece of real estate is only as valuable as the cash flow it generates.”

According to company research, Horizon Bay generated about $34,000 of revenue per occupied unit in 2007 compared with an industry average of just over $30,000. The net operating income at Horizon Bay was almost $14,000 a unit compared with a little less than $10,000 industry wide.

Housing slump

The housing market has been a drag on occupancies, however. “In the short term, we are in a difficult environment,” says Best. Occupancies declined 100 basis points to 93.5% in the last quarter.

“There's nothing wrong with that. But the trend lines are in the wrong direction,” notes Best. He attributes the weakness to a slow economy, anxiety among customers about rising gas and food prices, and the difficulty of selling a home. Most residents must sell their home before they move to a Horizon Bay building.

The economic weakness will continue through the end of the year, Best predicts, though some markets are seeing an uptick in housing sales. Meanwhile, operators will have their hands full turning a profit as expenses rise.

New opportunities also lie ahead. A nimble operator, Horizon Bay had been focused on acquisitions and repositioning of properties for its partners. But with property values in flux because so few portfolios have traded hands, new development makes sense now, Best says.

Horizon Bay recently signed a joint-venture agreement with Dallas-based South Bay Partners to build several new facilities. A two-building project with independent and assisted living is under way in Lubbock, Texas. The other project in Coventry, R.I., includes 80 units of assisted living and 30 units of memory care. Horizon Bay holds a subordinated, incentive-based interest in the projects, which is triggered after certain financial returns are met.

New development presents a lot of opportunity, notes Best. Land prices have fallen. Some construction costs are coming down, and demand for seniors housing continues to grow while new supply is limited. “We play the cycles as we see them.”