Another high-profile senior housing project is coming to Manhattan, through the nearly $150 million acquisition of a 15-story building on the Upper West Side.
The art deco building has 239 units, meaning that the purchase price equates to more than $625,000 per unit. Despite this eye-popping sum, the incoming owners describe the building—which has a notorious history—as a value-add project.
“We thought this was an asset that was underperforming and we should own,” Steven Krieger, partner with The Engel Burman Group, told Senior Housing News. “The guts of this building, with 11- and 12-foot finished ceilings, wide hallways, and expansive windows, are perfect for a value-add play.”
The property, which is currently called The Esplanade and bills itself as “luxury senior residences,” will be operated by an Engel Burman affiliate. Engel Burman, based in Garden City, New York, owns The Bristal Assisted Living, which operates 13 locations on Long Island, Westchester, and New Jersey.
The full plan for how The Esplanade will be updated, what care levels it will include, as well as a new name, still is being determined, he said. The property currently is not licensed as an assisted living facility.
The Engel Burman Group bought the building with partners The Northwind Group and Harrison Street Real Estate Capital LLC. Debt financing came in part through a $110 million acquisition loan from KeyBank.
Rents have not yet been determined, but the new owners believe they will be sustainable in the given market.
“We looked at it and felt good about the rental rates we think we can charge versus affordability,” Christopher Merrill, CEO of Harrison Street, told SHN. “We’ve been in some high-end markets, and we think for the return we’re looking to generate, we can support the rents that are needed.”
This project joins two other high-profile senior housing developments on Manhattan. One of these, involving real estate investment trust Welltower Inc. (NYSE: HCN) and Sunrise Senior Living, may charge $20,000 per month for memory care. The other is a $246 million tower to be operated by Maplewood Senior Living.
More than capital improvements are required for the Upper West Side property, however. In May 2015, a two-year-old girl died after being struck by debris that fell from the building’s facade.
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In September 2016, New York City’s Department of Buildings (DOB) brought criminal charges against Esplanade Venture Partnership and its majority shareholder, Alexander Scharf.
“Despite a recommendation … to immediately repair cracks in the exterior walls, appropriate action wasn’t taken,” the DOB stated in a press release. “The ownership made minor repairs but continued to allow the facade to deteriorate.”
The new owners recognize that they need to repair the building’s reputation.
“It’s an opportunity to change the reputation, to fix it,” said Merrill. “I think you have to have professional management, you have to have good policies and procedures in place … bring in the right people. The residents will see change.”
Filling a Need
High costs and limited land make New York City a tough market to enter, but the need for senior living options appears clear: There currently are only about a dozen licensed assisted living communities in the Big Apple.
Meanwhile, Manhattan alone was home to more than 1.5 million people as of the 2010 U.S. Census. And people who are 60 or older are projected to make up 20% of NYC’s total population by 2040, according to NYC Department for the Aging figures cited by the WSJ.
“From an infill standpoint, from an irreplaceable asset standpoint, we’re pretty excited about it,” Merrill said of The Esplanade investment. “When you look at the numbers of assisted and independent living and memory care needed on the island, it’s amazing.”
Written by Tim Mullaney