On Presbyterian’s original campus, Johanna Shores in Arden Hills, Minn., Weis had demolished a 166-unit facility that dated back to the 1960s and replaced it with a 162-unit facility offering 54 independent-living apartments, 72 for assisted-living and 36 for memory-care housing. Across the street there’s an active adult community that has access to the other building’s amenities and services.
The lines separating senior housing products for different elderly owners and renters are not as clearly drawn as they once might have been.w
But one thing hasn’t changed: Weis Builders, which has been building senior housing for decades, is among only a handful of multifamily builders that have made the leap into independent- or assisted-living construction, even if they’ve ventured successfully into active adult.
Are most builders missing an opportunity, at a time when baby boomers will retire at a 10,000-per-day clip for the next 19 years? Or are they simply acknowledging the limitations of their business models, operations, and marketing?
More Than Just Housing
Harkins Builders has been building senior housing for more than 30 years. This Marriottsville, Md.–based builder has several independent-living projects in its portfolio, including Village Crossroads in Fullerton, Md., which it built for Catholic Charities of Baltimore, and whose 94 affordable independent-living rentals—averaging about 550 square feet—were fully occupied by mid-July. Harkins Builders just started Village Crossroads’ second phase, with 86 units.
Dick Lombardo, Harkins’ president, doesn’t think most multifamily builders are structured to take on the “labor-intensive” and “highly specialized” construction and management that independent-living requires. In addition, he suspects that most multifamily builders are less than enthusiastic about dealing with HUD or community development agencies that help finance these projects. “It’s just not worth their while,” he says.
There is not a clear-cut bridge from active adult to independent living, either.
“Senior housing is 30 percent real estate, 70 percent services,” says Margaret Wylde, president and CEO of ProMatura Group, a leading research and consulting firm in Oxford, Miss. She explains that independent housing offers residents dining plans that Wylde says have become more flexible and diverse. These communities also offer housekeeping (usually once a week).
Another big reason why people go into independent living is transportation services, especially when their eyesight is failing and they can’t drive anymore. And given that elderly people seeking independent living are in their 70s and 80s and often widowed, they want a place that encourages social interaction.
“Where we see the lines are blurring is our residents wanting the choice to unbundle and customize their services,” says Mitch Brown, executive vice president with Kisco Senior Living., which owns, operates, develops, and builds senior housing. Half of Kisco's 3,343 rental units in seven states are independent-living apartments.
Brown says he's already seeing some intermingling between active adult and senior housing and expects to see more. In August, Kisco is scheduled to break ground on a six-acre, 200-unit project (half of whose rental apartments will be independent living) that's right next to a 550-unit, for-sale, active adult neighborhood called Garden Park, in the center of Daybreak, the massive walkable and sustainable master-planned community in Utah.
Crossover within different types of senior housing is already the norm. While it is not unheard of for independent living to be standalone housing, more commonly this housing is built on campuses that include assisted-living and even continuous-care residences and services.
“What you often end up with are people in their 80s who want to age in place, but don’t want the stigma of assisted living,” says Jayne Sallerson, executive vice president for Seattle-based Emeritus Senior Living, which manages 480 senior housing communities in 45 states, with another 14 to 20 communities in development.
However, such combinations aren’t always ideal for multifamily builders. For example, Cleveland-based NRP Group sees opportunities in building housing for independent seniors, but not those in their 70s or 80s, “which is an entirely different demographic,” explains Aaron Pechota, NRP’s vice president of development. He adds that another reason that probably keeps multifamily builders away from senior housing is they’d have to convince homeowners to convert to renters of independent or assisted living.
However, that didn’t seem to be a problem in affluent Coral Gables, Fla., where on June 7 The Palace Group opened a luxury-rental, senior, independent-living community with 243 apartments on nine floors. The apartments range from 460-square-foot studios to 1,150-square-foot, two-bedroom apartments, with monthly rents (including dining plans) spanning from $4,600 to $8,000.
The city of Coral Gables mandated that 20 percent of the rooms in this building be rented as assisted living, which The Palace Group calls “catered care,” says its vice president of marketing and sales, Adam Davidson. However, the assisted-living apartments are only available to tenants who are “alert and oriented” but might need help with dressing or bathing, says Davidson.
Trends To Watch
Multifamily builders considering a dip into the senior housing pool might be buoyed by the fact that investment capital is flowing into this sector, albeit more toward assisted living than independent living.
In the second quarter of 2013, independent-living construction was 1.6 percent of existing inventory, meaning that 16 units are being built for every 1,000 already occupied. That compares with 4.9 percent for assisted-living construction, says Chris McGraw, senior research analyst for the Washington, D.C.–based National Investment Center for the Seniors Housing & Care Industry (NIC).
(NIC’s estimates do not include tax-credit or subsidized housing.)
Still, demand for senior housing in general is “not going away,” says Lombardo. There’s a 13-year waiting list for RHF Communities’ Angelus Plaza in downtown Los Angeles, the largest affordable senior housing community in the country. Architectural firm KTGY recently renovated Angelus Plaza’s 1,093 housing units (each exactly 505 square feet) and 80,000-square-foot community center, which offer a range of living options and services.
Determining apartment size trends depends on whom you talk to. Emeritus’ Sallerson says apartments her company has been building lately have gotten larger, and among the newer services tenants ask for are access to Wi-Fi and other technology. On the other hand, Rick Fenske, Weis Builders’ vice president of business development, says apartment size “has been dialed back a bit” since the housing recession hit in 2008.
Minnesota is an anomaly, in that there are more developers of independent- and assisted-living communities than there are developers of active adult housing. Minnesota is where the concept of senior co-ops originated in the late 1980s. Weis Builders was at the forefront of that movement, says Fenske, who describes co-ops as hybrids of condos and rental properties, where the resident owns a share of the building, which is a nonprofit organization. (So if there are 150 units in the building, each resident would own 1/150th of the corporation.)
More recently, this concept has evolved into limited-equity co-ops, whose appreciation rises and falls with market conditions. The owner receives a cut of the profit when the unit is sold. “This keeps the units affordable and maintains the waiting list,” says Fenske.
Just as the co-op concept has spread beyond Minnesota, the retirement-commune trend is now moving beyond Massachusetts. The Boston Globe reported last month on this “aging in community” movement, and noted that it’s entirely possible that aging baby boomers might choose in the future to live together in groups based on special interests, like gardening or even musical preferences.
One of those preferences might be urban living. Manny Gonzalez, a partner at KTGY, notes that his company recently worked on two projects for the Foursquare Foundation that reflect this preference. One, Parkview Living in the Echo Park district of Los Angeles, has more than 62 market-rate independent senior rentals; another, in downtown Portland, Ore., has 136 units.
KTGY is also working on a townhouse project for KB Home in Playa Vista, Calif., that will have 57 attached units with ground-floor entrances and elevator service to three stacked plats. Gonzalez sees this as a multigenerational product.
So when people tell him that only about 4 percent of people over 65 years old want to retire in an urban environment, Gonzalez responds, “That works out to 400 people a day who are turning 65. The sheer numbers are so big that you can make a killing in the right location to attract the right buyer.”
John Caulfield is senior editor for MFE sister publication Builder.