A developer and investor in active adult communities is pivoting from an entrance fee model to middle-market rentals in order to spur move-in velocity in the age-restricted senior housing market.
Omaha, Nebraska-based Essex Communities recently acquired The Reserve on Walnut Creek, a 121-unit age-restricted independent living community in Urbandale, Iowa, and will convert the property to a rental community – its sixth such acquisition and conversion in the past three years, Executive Vice President Frankie Pane told Senior Housing News. The Reserve on Walnut Creek has been rebranded as The Arbordale.
The firm has a diversified service portfolio including development, property management, marketing and general contracting, and is also aggressively pursuing third-party partnerships as a way to leverage its expertise and build scale.
“It’s helped us, as a developer and as an operator, identify the best product to appeal to the greatest amount of prospects,” he said.
Essex has a portfolio of 12 age-restricted communities in six states, with two more under development. The firm did not always play in the age-restricted space; when it launched 43 years ago, its focus was originally co-operative housing. Essex’s investment thesis evolved toward a nonprofit entrance fee community model, in part because the company did not want to navigate the rules and regulations of Department of Housing and Urban Development (HUD) financing.
The 2008 financial crisis forced Essex to reevaluate its commitment to the entrance fee model, however, as prospects looking to move to the senior housing space had less money in their nest eggs and, by extension, less flexibility in their purchase options.
Essex’s market data showed that seniors transitioning to the space were willing to entertain age-restricted rentals, but demand significantly outstripped supply in its markets. Despite the best efforts of its sales and marketing teams, the company could not generate marketing velocity for its entrance fee product. This made the decision to shift to middle-market rentals academic.
As the industry continues to search for a definition for active adult senior housing, Pane believes that the lack of a single dominant model gives Essex a competitive advantage, because it fills a niche in the market and has experience in the space. While other developers and operators struggle with aspects such as amenities and a la carte services, its communities offer residents weeknight dinners, which their market research found is of interest to prospects.
Essex’s success in the age-restricted space is rooted in finding a specific niche and focusing on fulfilling it. Pane believes that there is room in the Wild West of active adult for operators to target their own price points and customer base, and eventually connect age-restricted housing to the greater care spectrum.
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Essex sees opportunities to build scale through acquisitions moving forward, but will do so conservatively. The firm searches for opportunities in its markets, and some sellers have presented other options. What is paramount with these opportunities is ensuring the demographics are primed for growth, and that any new community will be a smooth fit for its larger culture. The firm has walked away from past opportunities where the fit was questionable, which Pane believes has helped Essex’s reputation over the years.
That willingness to be selective trickles down to Essex’s corporate culture — executive directors at its communities average up to 16 years of service, while the average tenure of community level staff is nine years.
“That’s fairly unheard of in our industry and a feather in the cap to the communities and the operational approach that we have,” he said.