Prominent investors and operators recently said that hotel conversions could be a way to expand senior housing in urban markets with high barriers to entry, such as New York City.
One such project is now coming to pass, as part of a larger push that a New York City-based developer and investor is making into affordable senior housing.
That firm, Fairstead, is planning a $60 million adaptive reuse of a historic hotel on Manhattan’s Upper West Side into affordable senior housing. This brings senior housing at a very different price point to the Big Apple, where several luxury senior living projects are soon to open.
Fairstead also acquired over 700 affordable senior apartments in South Florida, and intends to expand its footprint across the Sunshine State and enter new markets nationally, Founding Partner Will Blodgett told Senior Housing News.
This is part of a plan to earmark up to one-third of its total portfolio to affordable senior housing. Fairstead owns and manages over 12,500 multifamily units across the country — the vast majority affordable apartments — since the company’s 2014 founding.
Already, Fairstead is making progress on its commitment to affordable senior housing. The segment accounted for 10% of its total portfolio mix in 2018. Currently, affordable senior apartments account for nearly a quarter of its total asset blend. Blodgett’s commitment to affordable housing is inspired by Frederick Law Olmsted, the landscape architect responsible for, among others, New York City’s Central Park and Jackson Park in Chicago, the future home to the Obama Presidential Center.
“[Olmsted] viewed parks as one of the only places on earth where everyone — rich and poor, black and white, gay and straight, old and young — could interact with each other and learn from each other as true equals,” he said.
A historic renovation
Fairstead worked for nearly two years to acquire the Park 79 hotel, a deal that was completed last month. The $60 million redevelopment will convert the hotel into 77 affordable apartments for independent seniors, and is financed through a $51 million construction loan from Merchants Capital, $28.4 million in permanent financing from Freddie Mac originated by Merchants Capital, and a 9% Low Income Housing Tax Credit (LIHTC) equity investment from Boston Financial.
Upon completion in 2022, the property will remain affordable for 60 years through a regulatory agreement with the New York City Department of Housing Preservation & Development. Blodgett was committed to realizing the project, noting its location and proximity to Olmsted’s Central Park.
“The Upper West Side of New York City is one of the greatest neighborhoods in the world,” he said. “This is a very high opportunity area and the building itself will have some great amenities. But perhaps the greatest amenity will be the neighborhood itself.”
Fairstead is partnering with Project FIND, a local nonprofit committed to preserving seniors on Manhattan’s West Side with support and services, on amenities and programming. The redevelopment will have two full-time social service coordinators working with residents to develop community programming. Additionally, the building will have a full-time attendant in the lobby serving as a concierge.
This is standard across Fairstead’s affordable senior holdings. The firm has a social services group which works in close coordination with development and acquisition teams to determine the programming needs of an asset.
Fairstead’s activity in Florida this year is a harbinger of things to come for the firm. The acquisitions in South Florida were highlighted by the June acquisition of Federation Sunrise Apartments, a 123-unit Section 8 housing building for seniors in Sunrise, Florida.
In total, Fairstead acquired 787 affordable senior apartments in South Florida. The firm plans a completed renovation of the assets, as well as preserve the affordability on the properties for an additional 40 years.
South Florida is a hotbed of market rate senior housing development in recent years, with providers and real estate investment trusts (REITs) seeking development and acquisition opportunities. Some providers are even exploring health system partnerships to gain a foothold, and scale, in the market. Notably, Belmont Village and Baptist Health announced a partnership last year to develop a pipeline of communities in South Florida. The first project will be in Coral Gables.
Blodgett sees its South Florida activity as a launch point for a major expansion across the state. Fairstead is eyeing opportunities in other markets and hopes to expand to up to 20 states.
“We’re hopefully going to be expanding the program and continuing to acquire and preserve senior affordable housing in the state of Florida,” he said.