Seeing a mismatch between current demographics and the existing inventory of senior living options, Capitol Seniors Housing (CSH) has started developing rental communities for a younger segment of the aging population.
Based in Washington, D.C., Capitol Seniors Housing is a private equity-backed real estate investment firm. Since its founding in 2003, the firm has been focused on independent living, assisted living and memory care, but last year branched out. As part of a larger pivot toward focusing on ground-up development, it re-hired Michael Hartman, one of the original founders, to head up its new Active Living platform.
There’s a lot of IL, AL and memory care out there, but the baby boom generation has not yet aged into needing these levels of care, Hartman told Senior Housing News. Meanwhile, there’s a lack rental housing that has been purpose-built for younger seniors.
“There’s lots of people retiring, and the housing out there is for frail people,” he said. “There’s an inventory mismatch.”
To meet what it sees as this market need, CSH has come up with a prototype active living model.
That prototype is about 160 to 180 units on a six-acre plot in a suburban location that is walkable to retail, with a total budget of around $30 million per project. The firm is targeting high barrier to entry markets that have a density of 200,000 people within a 5-mile radius. Amenities typically include a nice welcome/leasing area, a bistro with coffee and TVs, a fitness center, arts and crafts room, and sometimes a theater, pool, dog park and community garden.
Unlike independent living communities, active living properties do not have on-site commercial kitchens preparing daily meals. However, the CSH prototype design allows for a commercial kitchen to be bolted on down the line. The idea is that younger residents of today might choose to age in place; down the road, it might make sense to introduce a dining component, if enough residents in a building would buy in to support expenses such as hiring a chef and staff, Hartman said. Having the flexibility to bolt-on a kitchen does add to costs, he noted.
Currently, CSH has a goal of five to seven projects breaking ground each year, and currently is on track with a pipeline of projects in the entitlement phase, he said.
Understanding the consumer
The firm has done focus groups to determine why a senior would choose an active living building rather than just a traditional multifamily rental, Hartman explained. The three main reason are:
1. To live with like-minded individuals, and to be able to take advantage of amenities like a pool or gym without having to feel self-conscious.
2. To have an outlet for hobbies and activities. Capitol Seniors Housing is hiring an activities director at its Active Living buildings, to plan and execute three types of events—those focused on the mind (such as trivia), body (such as yoga) and dining (such as potlucks or wine and cheese parties).
3. To live in a place “with no surprises.” Given that seniors usually are living on a fixed income, they want a stable housing situation that is unlikely to have problems requiring extra money to fix, such as a broken roof.
CSH is not alone in seeing the market opportunity here; Hartman pointed to well-known multifamily developers like Greystar and Alliance Residential that also are pursuing active adult. For instance, Greystar is including 160 active adult units as part of a 135-acre, $370 million mixed use project in Georgia, dubbed Halcyon, which it is currently co-developing with RocaPoint Partners.
But CSH thinks that investors and operators that have senior housing expertise will have a leg up. There is an operational component to these buildings, such as having the activity director, that is more akin to senior living. Capitol Seniors Housing is in talks with some senior living operators to also manage its active living communities, Hartman said.
Plus, a familiarity with the older consumer helps, he argued. For example, the sales process is longer with seniors than with younger people, who often are moving from one rental to another and don’t have to wait for their home to sell.
Still, there are some challenges to overcome. One issue is that, while seniors’ propensity to rent is increasing, this is still a relatively new product type. Seniors have been buying condos on golf courses or in Del Webb-style planned communities for decades, but active living rental communities need some explanation.
“Part of our challenge is the branding, marketing, the psychology of selling your big house and moving into an apartment,” Hartman said.
Written by Tim Mullaney