Trailblazers in the active adult space have their sights set on capturing multiple consumer segments for the product.
One possible scenario involves building a continuum within the active adult sector where residents can transition from single family cottages to apartments, en route to an eventual transition to full-service independent living. This continuum would be all rental, with a la carte services added by residents as needed. Real estate firm Lloyd Jones is already working on this model, and expects it to be mutually beneficial for owners and residents over time.
Other developers — such as Newport Beach, California-based Avenida Partners — are targeting markets with active adult rentals at different price points, in order to capture the growing demographic of baby boomers expected to flood the space over the next 10 to 25 years.
Active adult represents the biggest real estate opportunity that Lloyd Jones Founder, Chairman and CEO Chris Finlay has seen in his 40-year career, but it is also a challenging sector to enter.
Notably, operators find themselves having to convince seniors to make the move from a single family home to a smaller space, as well as educating prospects on the benefits of a move. This requires a lot of footwork by sales and marketing teams, months and even a year before a building opens, Avenida Partners Managing Partner Robert May said Wednesday during Senior Housing News’ Virtual Active Adult Summit.
It also requires correctly identifying the right markets to build active adult, deducing demographic trends for growth, and predicting what residents will need in order to comfortably age in place for the next five to ten years.
“You need to hit the bullseye on all those,” May said.
Building an active adult continuum
Lloyd Jones is a prominent name in multifamily development and has long been involved in the age-restricted sector as well, Finlay said. More recently, the firm launched its Aviva-branded active adult model.
The Aviva portfolio is being build with three distinct models. Aviva Cottages are a for-lease cottage product which Finlay envisions as an entry point for the first wave of boomers transitioning to active adult. Aviva 55 is three- to four-story buildings, and the firm is building a more traditional independent living product, with the first building set to open in Port St. Lucie, Florida later this year. It will include two wings and a central clubhouse, enabling Lloyd Jones to lease up one half of the building while the other half is under construction.
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An obstacle to building more cottages is a lack of available land to build a horizontal development at a scale necessary to generate adequate returns for investors. But Finlay believes that the model would be especially popular with seniors in suburban markets making their initial transitions from single-family homes. Conversely, the Aviva 55 concept is better suited to urban environments where lot sizes are smaller, and will appeal to consumers looking for the lifestyle afforded by these locations.
Finlay believes that an all-rental model holds untapped potential for developers and residents. As seniors age in place, they can use home health care services and technology to maintain an elevated quality of life for an extended period of time. The rental model will allow residents to manage their retirement nest eggs better.
“We feel that there will be amazing demand for people to sell their homes and retain equity to help with retirement,” Finlay said.
Active adult communities tend to be slow to lease-up, but once occupancy levels reach stabilization, they tend to remain constant. For new buildings, Lloyd Jones pencils lease-up pro formas at around six new move-ins per month, but the average length of stay among residents is over 10 years, and the oldest resident in an Aviva community is 103, Finlay said.
He noted that occupancy across the Aviva portfolio is at around 99%, while operating margins are comparable to independent living’s average of 35%. Resident satisfaction, meanwhile, is high.
A localized sales approach
Newport Beach, California-based Avenida has two active adult lines: an affordable model with rents averaging $1,850 per month; and a market-rate line with average rents between $2,100 and $2,200 per month.
Avenida’s move to create an active adult product that can flex between different price points depending on a building’s location and other factors is similar to what senior living providers are doing in other parts of the continuum. For instance, Eclipse Senior Living, Atria Senior Living and Merrill Gardens all have ambitions to create different operating models to serve various parts of the market.
Nearly all of Avenida’s buildings range between 140 and 160 units, which puts pressure on the developer to be correct on locations, programming, activities and demographic trends, because active adult is not a needs-based move, compared to the rest of the senior housing care continuum.
Avenida’s target markets are very localized, with around 50% of its residents coming from within 10 miles of its communities, May said during Wednesday’s virtual summit. About two-thirds of its residents sell their homes in order to move into a building.
Because active adult is a newer segment of senior living, developers in the space hit the ground early to educate the target demographic on the benefits of the product. Avenida keeps track of housing sales in its markets to identify potential customers and generate leads. Additionally, its sales teams spend up to 12 months before a community welcomes new residents educating prospects on its offerings and services.
The firm also reaches out to senior housing providers in its markets. This alleviates fears that they are going after the same customer, as well as establishes mutual referral networks to send referrals who would, for example, be better suited for independent living to a competitor, and vice versa.
May sees the biggest obstacle to a move as the family that does not want to sell its home. Once Avenida is able to overcome that objection, however, it has move-in coordinators on staff to assist families with closing escrows and downsizing their belongings to prepare for the transition.
“We think that people want to move, but they don’t need to move. It eventually morphs into a need as they fight isolation and depression, and they discover a sense of community in our buildings,” he said.