Nonprofit senior living providers have historically driven innovation in the field, but there is some concern that they are being eclipsed in this regard by for-profit competitors that are controlling more market share, can bring capital to bear more quickly and have a higher risk tolerance.
The differences between nonprofits and for-profits may not be as stark as some imagine, but it is the case that these two different types of organizations can learn from each other and may not be as siloed in the future as they have been in the past.
That was a key takeaway from a panel discussion Tuesday at the LeadingAge conference in San Diego, the largest annual gathering of nonprofit senior living providers in the nation.
From tapping into the active adult space to experimenting with new pricing models to creating more intergenerational living environments, these are three for-profit projects that nonprofits may want to keep in mind when considering their own strategic plans for the years ahead.
Dubbed “a new concept in 55+ living,” Canvas is a 232-unit, $49 million active adult rental community that opened in Spring 2018 in Valley Forge, Pennsylvania. It is a Bozzuto Development project owned by Carlyle Realty.
There are several elements of the project that should be of interest to nonprofits, said Dan Cinelli, principal at architecture and design firm Perkins Eastman.
For one, the active adult space has become red-hot, with a slew of for-profit developers getting into the game — and for good reason. Cinelli shared a bevy of statistics demonstrating the market opportunity for reaching this group, including the fact that today’s active adults over the age of 50 represent the third-largest economy in the world, and 46% of affluent boomers have a net worth exceeding $2 million. And, this demographic has a shifting preference toward rental housing.
In addition to its active adult focus, another interesting facet of Canvas is its location. It is built on the site of a former restaurant, next to a mall. As retail centers struggle due to the rise of e-commerce, this real estate is becoming available for other uses, including senior housing, Cinelli pointed out.
And the presence of the nearby mall supports a lean service model. With 20 restaurants within walking distance, it alleviates the need for a robust dining program.
“[Canvas] has no kitchen or restaurant, none of the trappings of a life plan community, because everything you need is within 200 feet of your front door,” he said.
The building design features two bays for food trucks, creating another option for dining.
The location also speaks to boomers’ stated desires to live in walkable areas with easy access to food, retail, culture, transportation and other amenities, Cinelli noted.
Rancho Mission Viejo
Rancho Mission Viejo is a for-profit, master-planned housing development in San Juan Capistrano, California. At full build-out, the plan calls for 14,000 homes, including 6,000 that are age-qualified for 55-plus. The first home sold in 2013, and there are now about 3,200 sold in total.
The development company — also called Rancho Mission Viejo — brought in Helen Foster during the early planning stages to consult on the age-restricted facet of the community. Foster is the founder and principal of Foster Strategies, a real estate development consultancy focused on age-qualified and service-enriched senior housing.
“We approached it with a whole different vision for how age-qualified gets integrated into communities,” she said Tuesday at LeadingAge, referring to Rancho Mission Viejo.
Rather than segregate the 55-plus housing into a separate, gated part of the development as is customary, the project leaders decided to intersperse the age-qualified housing within the standard multifamily homes, with the goal of creating a more intergenerational community. The 55-plus residents pay a premium and in return have access to age-restricted, exclusive amenities.
This “ageless living” model was not an easy sell, Foster said.
An initial meeting with Rancho Mission Viejo resident stakeholders did not go well, with one critic saying that the effort was “doomed to fail.” But Paul Johnson, Rancho Mission Viejo’s Senior Vice President of Community Development remained steadfast. Foster remembers him saying: “We must take risks. Without them, we would never have the chance to create something extraordinary.”
Foster also successfully advocated for Rancho Mission Viejo to allocate more than 40 acres for a continuing care retirement community. That project came to fruition with the June 2019 opening of Reata Glen, developed by Spieker Senior Development Partners and operated by Carlsbad, California-based Continuing Life.
Reata Glen encompasses 480 independent living units across three product types: single-story homes, stacked flats, and apartment-style living. The community also includes a health center offering assisted living, memory care and skilled nursing.
This marked the first time that Spieker was involved in an integrated marketing plan with a master-plan developer, Spieker Partner Troy Bourne said.
Master-planned developments represent another opportunity for other organizations to pursue, noted Perkins Eastman’s Cinelli. He cited Moorings Park in Naples, Florida, as another example. For-profit developer Barron Collier Companies worked with Moorings Park — which already had a continuing care retirement community in Naples — on a new campus built on 16 acres near an existing gated community.
“Think about this for your strategic planning,” Cinelli advised. “How are you going to partner more with these kinds of folks and leverage your brand to do that?”
The Hacienda at the Canyon
Tucson, Arizona-based Watermark Retirement Communities is a for-profit provider that has consistently gained scale to reach its current portfolio of 60 operational locations, with more under development. A number of Watermark projects are bringing innovations to the space, particularly the buildings in its high-end Elan Collection.
This group of projects includes a $335 million redevelopment effort in Brooklyn Heights, and a $205 million redevelopment to transform a former UCLA dormitory building into senior housing.
Two Elan projects are located in Watermark’s hometown of Tucson. The Hacienda at the River is already operational and is noted for equine memory care therapy, among other distinctions. The Hacienda at the Canyon just officially opened the doors on its $85 million in phase one construction.
The Hacienda at the Canyon is introducing an integrative wellness operating model and a membership fee pricing approach.
Rather than an entrance fee, Watermark responded to focus group feedback to create the membership fee model, explained Watermark Director of Strategic Investments Bryan Schachter.
Residents pay about $40,000 to $60,000 in an upfront, non-refundable fee that is similar to a country club initiation fee. Also similar to a country club, residents are allocated $500 per month that they can spend down however they choose, including on wellness-related activities and amenities or on dining at any of the community’s five venues.
The combination of the membership fee and the spend-down card gives Watermark more predictable revenues month to month and greater flexibility to offer amenities versus a pure rental model, Schachter said.
“The intent is to go away from something where we as the operator are incentivized to keep costs down,” he said.
This pricing model suggests how nonprofits can think about adjusting the typical CCRC entrance fee model, but the point is not that type-A contracts are obsolete. Rather, it’s all about connecting with target consumers to meet their needs and expectations. The result likely will be a greater diversity of options, said Spieker’s Bourne.
“The market wants a lot of things,” he said.
Though nonprofits might find it thought-provoking to consider these projects, this is not to say that they are failing to innovate. In many instances, for-profits are learning from nonprofits. In one example, Rancho Mission Viejo drew lessons from another of Helen Foster’s clients, non-profit Willow Valley Communities in Lancaster, Pennsylvania.
In the future, the industry may benefit from more joint ventures between for-profit and nonprofit entities, the panelists proposed.
Watermark is open to working with nonprofits if the right opportunity were to arise, Schachter said. Already, Watermark received a ground lease from a Catholic high school to develop a senior living community adjacent to the school, he noted. It’s possible that Watermark could enter into a similar arrangement with a church.
“I think what’s happening is these walls are starting to come down,” Bourne said. “People are saying, there are things you do really well, there are things we do really well, are there ways for us to piece these things together?”