Challenges and Prospects in Repurposing Old Buildings for Assisted Living

When various types of buildings end up vacant and in disuse, sometimes the next logical step is to repurpose them for senior housing, especially as the nation’s senior demographic grows at a rapid pace.

Old hospitals, hotels, and schools are probably the three most common types of buildings that can be converted into an assisted living facility, because they’re typically already divided into individual units but also feature common spaces; rooms in hotels and hospitals often have the added advantage of already having private bathrooms.

However, embarking on these projects isn’t always a walk in the park, according to some companies with conversion experience.

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One of the mistakes that people make is thinking that because they might be able to get a conversion property cheaply, it will be a cost-saving project, but this isn’t necessarily the case, says Mike Collins, president of Senior Care Realty, LLC.

It can actually be more affordable to build from scratch, he says, and new construction is generally easier and more predictable, too.

In some circumstances, though, it does make sense, and when it comes to financing a project, there may not be too much of different compared to new construction. In some cases, conversions may even qualify for tax credits or historic preservation programs, Collins told SHN.

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One big factor is the availability of land. If there’s a vacant building in an area that’s been heavily developed, he says, it could present an opportunity for conversion.

Other factors include the market.

“I’ve encountered many developers who perhaps are overly optimistic about how profitable a development can be,” Collins says. “If you look at it purely as a real estate deal and not a business opportunity, people can make mistakes.”

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It’s important to understand the market and the business aspect before trying to take advantage of a real estate opportunity, he says.

The key indicator in deciding whether or not it’s worth converting a building is figuring out if the work can be done at a substantial discount to new construction.

Even if the building itself is being sold for a good value (think state-owned hospitals and schools that have fallen into disuse, or abandoned hotels), developers could face headwinds from a marketing standpoint, in that an old property may have “marketing baggage,” Collins says.

For example, an old hospital-turned-ALF maybe have a positive community perception, with residents having fond memories of their children being born there. On the other hand, a building that used to be a mental institution could be negatively viewed.

“There are always surprises when you’re dealing with historic buildings,” says Richard Westin, CEO of Agemark Corporation, based in Berkeley, Ca., naming “surprises” like asbestos or water damage that affects multiple floors.

The most common challenges when it comes down to physically converting an old building into an assisted living community include regulatory issues related to the physical plant, such as bathrooms that are not ADA-compliant; doorways that aren’t wide enough to comply with current regulations; utility costs that are much higher than they’d be in a new building; or the fire code not being up-to-date.

Ultimately, if a property can be acquired and remodeled at a price point that is at a discount to current construction costs, says Collins, then this sort of project makes sense.

Written by Alyssa Gerace