“What do boomers want?”
When it comes to housing, one answer is growing more than any other: active adult rental apartments. And the industry is taking notice, according to a new report from Senior Housing News.
In an SHN survey of 120 senior housing professionals, administered in September 2019, a whopping 87% of respondents said they are currently pursuing active adult apartment rental projects.
Respondents were not asked to drill down into what “pursuing” means, whether they are developing these projects to own them, or whether they are partnering with a multifamily developer in some capacity, such as a third-party manager or consultant.
But the data paints a picture of a senior housing industry ready to standardize active adult within the care continuum.
“We see (boomers) downsizing and simplifying and taking the lead from the millennial demographic right now,” says Carey Levy, president of Passco Companies Development. “They want to have an active, invigorating opportunity to experience the next five to 10 years of their life without the mortgage, insurance, overhead and the cost of maintaining a home.”
These age-restricted or age-targeted multifamily-style apartment communities have soared in popularity this decade among young baby boomers. They may share a general name with the Del Webb-style single-family home master-planned communities, but active adult rental apartments are a separate product type with a different consumer base and unique benefits and risks.
In other words, while the product isn’t necessarily new, four key elements are: consumer demand, investor popularity, the players behind it and its place in the care continuum.
Consumer interest is rooted in a senior’s desire to strip away the cost, responsibilities and commitment of home ownership.
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Yet that is just half of the equation. Since active adult apartment rentals are primarily a lifestyle-driven product, not a needs-based one, the product’s allure must be strong enough to sway these young, healthy boomers to leave their long-time houses in the first place.
The allure is the lifestyle that active adult affords, and the inherent acknowledgement that seniors who don’t need onsite care don’t want to live with people who do.
While many of the leading players in active adult are multifamily developers and private equity investors such as The Carlyle Group, senior housing professionals are increasingly joining them in that space, as they recognize the important role that active adult can play in their portfolio.
Non-profits Ebenezer Senior Living and Ecumen, both in Minneapolis, have active adult lines to bolster their portfolios and provide pipelines into their IL. Non-profit Trinity Health Senior Communities in southeast Michigan is exploring active adult too, for the purposes of adding a product line with a higher occupancy than IL or AL, as stabilized active adult tends to run in the mid-90s in occupancy percentage.
Among the biggest senior housing converts to active adult is Atlanta-based Holbrook. In April, the company outlined a $1 billion development pipeline of Holbrook-branded active adult projects, and they are selling off much of their IL and AL properties to fund it.
“We have recycled all of our cash in pure-play assisted living except for three … properties,” chairman Al Holbrook told SHN at the time. “We’re moving everything toward the Holbrook product line.”
An aging-in-place play
The push for senior housing to enter active adult is not just consumer-driven, nor is it solely a business decision on senior housing’s own terms. Competition from multifamily developers puts senior housing at risk of losing the upper hand with the incoming seniors, a consumer base the industry needs to capture sooner rather than leader.
The greater success multifamily developers have with active adult, the greater the chance that these developers will be able to keep their active adult residents longer than the typical seven to 10 years of stay, through a combination of aging-in-place technology and physical home design along with home health and non-medical home care, all of which could help active adult residents age in place for even longer, potentially not entering traditional senior living until they’re deep into their assisted living years.
“The idea there is to keep people in place and help them age in place,” says Chris Finlay, Chairman and CEO of Lloyd Jones LLC, which launches its Aviva 55 active adult brand in January 2020. “Hopefully they’re there forever.”
Speculation over the next phase of active adult rental is rampant, if for no other reason than the product’s massive potential for aging in place. For many boomers, aging in place, no matter the location, is a major driver of their housing decisions once they become empty-nesters; a 2019 study from Chase and Pulsenomics showed that 52% of baby boomers have no plans to ever move from their current homes.
Active adult rental is one of the tools senior housing has in its toolbox to help young boomers age in place and remain under their umbrella. And within active adult are a few tools. There is the pipeline method, like what Ecumen is doing. There is the build-to-adapt method, where a developer builds an active adult community in a way that makes it ripe for a transition into an IL, either on a unit-by-unit basis — with larger entryways, for instance, or building units that include space for easy-to-add grab bars — or as a community, by adding a commercial kitchen.
A third strategy is one that Lloyd Jones is employing with Aviva 55, which is to facilitate home health care services to residents on an a la carte basis, Finlay says.
No matter the strategy, there is great potential for active adult to solve multiple problems in senior housing. Whether it is as a middle market solution, a method for bringing young boomers back into the senior housing fold or simply building additional revenue lines, active adult has a future in the senior housing journey.
“The debt is no problem and the equity is no problem,” says Matthew Tarpley, a vice president in the New York office of health care real estate investment bank Hammond Hanlon Camp LLC. The company has 15 to 25% of its portfolio in the active adult space, a steep rise in the past 36 months, Tarpley says.
“There is no shortage in capital — it’s not a secret,” he says. All the smart money knows this is where the business is going and this is where they want to be. So from a debt and equity perspective, there is a huge amount of capital going after this specific class. These guys are smart. And the smart money is all over this.”
This article draws from the new report, “The Changing Face of Active Adult Rental.” Click here to access the complete report, which dives into the active adult collaboration and competition between senior living and multifamily, shows the data driving active adult development and illuminates the drivers that are leading young baby boomers to embrace active adult as a new living option.