Condominium units at Fox Hill, a luxury, Sunrise-managed senior living community in Bethesda, Md., are back on the market after a year-long marketing hiatus as multiple involved parties attempt to bring the community from the brink of foreclosure to stabilized occupancy.
With the real estate market headed toward recovery, success in relaunching struggling luxury retirement communities will depend largely strategic marketing—especially adequate manpower, says Kristin Kutac Ward, founder and president of marketing firm Retiring by Design, which specializes in repositioning and expanding senior living communities along with turnaround and “stalled” projects.
Fox Hill was planned and built during the height of the real estate boom, but its Fall 2008 opening coincided with Lehman Brothers going bankrupt and the market crashing. It was a disaster for the community’s fill-up phase, as only about 65 of the 240 high-priced condominium units sold.
The project’s development lenders were a “consortium of German banks and other lenders that couldn’t agree on what to do and how to react to the changes in the market—so they did nothing,” says Ward.
Exacerbating the problem, she says, was how the upscale community was being marketed.
The Fox Hill community has a somewhat unusual structure and is not a traditional entry-fee model continuing care retirement community. Sunrise at Fox Hill offers healthcare services including assisted living and memory care in one building, along with amenities such as dining venues, recreational spaces, a fitness center with a pool, a spa and salon, and an indoor driving range.
There’s also a residential condominium building where residents own their units but are entitled to certain Sunrise-managed amenities with right of priority to the campus’s healthcare facilities.
“Sunrise is a wonderful manager, but they’re known for assisted living,” says Ward. “They put the Sunrise name out there in marketing and promoted the onsite assisted living and memory care, but I think it confused the market and they didn’t understand that it was very different: a for-sale product for very independent, active seniors.”
While other communities introduced discounting or other incentives, the Fox Hill project’s lenders were “frozen” and made no compensation for the change in the market, she adds.
Marketing for the condo units had ceased by the time the project’s loan maturity had been reached. By Spring 2012 foreclosure was a very real possibility for the community, and a foreclosure auction was scheduled.
The lenders ended up selling their debt to a U.S.-based financial company—which was the best thing that could have happened, says Jeffrey Sands, Esq., managing director for Fairfield, Connecticut-based HJ Sims, which owns Fox Hill’s residential condominium.
“The issue was never anything about the building itself,” says Sands. “It was always about the project opening at a bad time for luxury condominiums, and in late 2009 into 2010 it was priced too high for the market at the time.”
The new lender worked with Sims and Sunrise to restructure the community’s debt and as part of the agreement, finalized in December 2012, Sunrise transferred the minority ownership interest it had in the residential condo to Sims to concentrate on the management side of business.
The first thing Sims did was bring in an experienced marketing team, Retiring by Design, that had already worked on marketing Princeton Windrows, a similar project in New Jersey.
Princeton Windrows struggled to fill up when it opened, too, says Ward, partially because of the housing market, but also because the product wasn’t being marketed correctly. It was only about 50% occupied when her firm started working with the community about three years ago, but now it’s 80% sold and is on pace for 25 more sales by the end of June, according to Ward.
Retiring by Design’s strategy centers around understanding the owners that already live in a community, and why they chose to move in, says Ward. While the Princeton and Bethesda communities are similar in some respects, marketing for each must highlight what sets it apart.
The Fox Hill condo units were repriced in line with the Bethesda market. Each unit was reviewed to determine “appropriate pricing,” which ended up being an average 30% lower than original pricing. When Fox Hill opened, the residential units ranged between about $495,000 to $1.6 million. Now, they’re priced between about $350,000 to $1 million.
With new pricing in place, Retiring by Design and Sims are launching a marketing strategy that better represents and captures the community’s target audience.
Now that the economy is improving, some communities are making the mistake of using the same marketing strategies employed before the downturn.
“They think it will work again, but it won’t because the consumer has changed,” Ward says. “Manpower is one of the biggest requirements. You’ll see communities trying to sell 200 units of independent living with one person, which would be fine if all they were doing is responding to inquiries.”
But waiting around for inquiries isn’t enough to relaunch a high-end community, and attacking the growing “I’m not ready yet” market these days, according to Ward, requires substantially more time and manpower. Pre-2008, it took an average of 20-25 “touches” per sale of an independent living unit in a CCRC, equating to about 20 hours per sale. Now, that number is between 40 and 45 contacts per sale, averaging about 40 hours, according to Ward.
“The market for this product has changed—not just because of the economy, but also because the Internet has become a source of education,” Ward says. “People have more choices than ever before. The consumer has changed, therefore the sales process has changed.”
Ed. note: A previous version of this article incorrectly identified Ms. Ward’s company as “By Design Solutions” instead of “Retiring by Design.”
Written by Alyssa Gerace