Developers incorporate elements of single-family homes into their market-rate and affordable product design to attract residents.
By Jane Adler
Apartments without services could be the next hot product category in the seniors housing sector. Developers are quietly experimenting with a range of upscale projects that in many respects mimic active adult communities that offer single-family homes for persons age 55 and up.
Similar to the projects pioneered by developer Del Webb, the new apartment communities are designed to appeal to younger seniors seeking an amenity-rich environment. The apartment projects may not boast golf courses, but they often feature the latest lifestyle offerings sought by new retirees. Yoga studios and upscale cafes are commonplace today at senior apartments.
Unlike active adult communities with single-family homes, the new projects are targeting apartment renters. These seniors probably owned a house at some point, but now they are renters by choice and not tied to a particular place for the long term.
That gives them flexibility to move and rent elsewhere if their circumstances change, such as when adult children and grandchildren move away.
At the same time, affordable apartments — the mainstay of the senior apartment category — are getting a facelift as developers add fine finishes and details to their projects. The buildings continue to lease up easily and perform well financially.
Affordable apartments for seniors often have waiting lists of applicants, and building owners want to keep it that way. So they’re boosting unit size, adding granite countertops and designing new types of common areas to appeal to new retirees.
“The demand for apartments from Baby Boomers will continue to rise,” predicts Dave Erickson, director of development in the Naperville, Ill., office of Minneapolis-based Ryan Cos. U.S. Inc. He adds that both affordable and market-rate apartments will be popular. “The demographics are there.”
Azulon at Mesa Verde apparently hit the sweet spot. The market-rate apartment project in Costa Mesa, Calif., which targets persons age 55 and over, was fully leased in less than 10 months and has a 50-person waiting list.
“We got the timing and the market niche just right,” says Jeff Reese, project manager at Costa Mesa-based MV Partners, the developer of Azulon. MV Partners is affiliated with C.J. Segerstrom & Sons, the family that developed and owns the high-profile South Coast Plaza, an upscale retail center in Orange County.
Reese attributes the fast success at Azulon to a combination of demand for a high-quality, age-restricted rental option and the property’s superior location.
Wow them, not underwhelm them
The 215-unit Azulon at Mesa Verde opened last October. Monthly rents range from approximately $1,700 to $2,500. Floor plans are available with one-bedroom/one bath; one-bedroom, plus den, and one-and-a-half baths; and two-bedroom, two baths.
The development offers no services, but it is located adjacent to the Mesa Verde Center, a shopping center owned by the Segerstrom family. The center features a supermarket, CVS drugstore, Starbucks coffee shop, restaurants, a hair salon and other retailers. Residents of Azulon can walk to the shopping center without crossing a street or a parking lot.
“The foot traffic pattern was designed in a thoughtful way,” says Reese. The Segerstrom family already owned the land on which the Azulon project was built.
Although Reese and his team started envisioning the project as early as 2008, the financial crisis sparked by the housing downturn delayed plans to move ahead. But the crisis also gave them time to survey every 55-plus apartment project in Orange County to determine what to include in their project and, more importantly, what to avoid.
The team discovered a number of problems with the area’s market-rate, age-restricted apartments. The interior finishes were only standard at best with laminate counters, flimsy doors and low-grade carpeting. Common areas were drab and fitness spaces were small — almost an afterthought with a few treadmills and stationary bikes in an empty unit.
“We wanted to raise the bar,” says Reese.
MV Partners hired architecture firm KTGY Los Angeles to design Azulon at Mesa Verde. The property features Spanish architecture, both inside and outside of the units, harkening back to early California designs. Archways, stucco and tiles are used throughout.
About 40 percent of the property is open space with rambling gardens and a large pool and fitness area. One garden area features a raised fountain with hand-painted tiles.
The pool is a focal point. Residents entering the clubhouse can’t help but look through a two-story window to view the pool and fitness center.
“It is a major statement,” says Reese. The yoga studio has a “floating” wood floor that provides some give to help cushion older joints. “We wanted this to feel like a resort,” he adds.
The apartments feature granite countertops, stainless steel appliances and wood floors. Project architect Manny Gonzalez of KTGY created an apartment layout that includes a light-filled great room like those found in single-family homes.
“Sometimes thinking differently can give the renter something he or she wouldn’t have gotten otherwise,” says Gonzalez.
It’s hard to know if the formula used at Azulon can work elsewhere. But the spread of market-rate apartments for seniors comes at a time when renting has become more popular for a variety of reasons (see sidebar, page 36).
A developer’s evolution
NorSouth Development, based in Atlanta, develops and owns affordable senior apartment buildings financed by the state-run tax credit program. But the company is gradually adding more market-rate units to its portfolio, with plans to eventually develop some buildings that feature only market-rate units. “We see an opportunity,” says Brendan Barr, senior vice president of development at NorSouth.
NorSouth has two apartment brands: HearthSide for projects located in close-in suburbs; and MainStreet for projects located farther out. None of the buildings offer services. Each brand includes a mix of market-rate and affordable units.
The MainStreet properties are large and include multiple buildings because land costs are lower farther out from the city.
The HearthSide communities are typically four-story elevator buildings. Last April, NorSouth opened HearthSide Sugarloaf, its fifth HearthSide community. A sixth building is underway and will open in early 2016.
About 15 percent of the units are market-rate apartments in the first HearthSide project, which opened in 2010. NorSouth’s most recent project, HearthSide Sugarloaf, has 110 units and 30 percent are market-rate apartments.
A one-bedroom, market-rate unit at Sugarloaf rents for $1,200 a month; a two-bedroom is $1,600. That rent is about 60 percent higher than the cost of the affordable units in the building.
The affordable units offer standard finishes, but the market-rate apartments include upscale features such as granite countertops, stainless steel appliances and crown molding. “We are competing with traditional market-rate properties,” says Barr. “We have to offer equivalent features.”
NorSouth will continue to develop affordable senior housing. “It’s part of our mission,” says Barr. But the company also plans to develop a new market-rate apartment brand for seniors.
He envisions that the market-rate brand will consist of slightly larger communities than NorSouth’s existing communities in order to increase operating efficiencies.
But future buildings developed by NorSouth will not offer services or meals, emphasizes Barr. “We are staying in the active adult, multifamily area.”
Affordability with Style
Meanwhile, developers and owners of affordable apartments for seniors are upgrading building designs. In 1995, Senior Lifestyle Corp. opened its first Senior Suites property, an affordable apartment project in Chicago.
The company now includes 24 Senior Suites buildings, most in the city of Chicago. Rents for a one-bedroom apartment average about $774 to $800 a month.
The original projects included many studio apartments, but the newer buildings offer only one- and two-bedroom units. The flooring has been upgraded.
Senior Suites of Bellwood, just outside of Chicago, opened in May. The units include wood-like laminate flooring. “The trend is to make the buildings fancier, more residential,” says Lisa Reed, vice president of operations at Chicago-based Senior Lifestyle.
Ryan Companies U.S. continues to refine its affordable apartment designs. Its newest project is Arbor Place of Lisle, which opened in August. Located in the western Chicago suburb of Lisle, the project features 80 units. The units are large; some two-bedroom apartments span 1,075 square feet.
Solid surface countertops are used in the common areas. The library has built-in shelving. The vaulted two-story lobby includes a stone-faced fireplace. Common areas feature chandeliers and can lights. The multi-purpose room has a wood “dance floor,” and carpet tiles were used throughout to bring interest to the flooring.
The private, landscaped courtyard features a gazebo. “You would never know this is affordable housing,” says project architect Smita Torgal of the Chicago-based firm Taylor Made Design.
Aging in place poses dilemma
Though senior apartments offer no services and are meant for those who are independent, operators still face the problem of residents who age in place. Seniors are desirable tenants because they pay their bills and don’t tend to move very often. That helps create waiting lists and occupancies near 100 percent. But many residents eventually need some kind of help.
Building owners and managers admit it’s a problem. Most allow residents to bring in help as needed. Those who require 24-hour supervision or medical attention usually are asked to move. Some apartment operators offer referral services to help the residents, and their families, find a suitable place to live that offers healthcare services.
Ryan Cos. is branching out from senior apartments to develop new projects that offer a continuum of housing with independent and assisted living and memory care units. Life Care Services of Des Moines will operate the projects under the brand name Clarendale.
Clarendale of Mokena, south of Chicago, is scheduled to open in September with 156 units. In July, Ryan Cos. broke ground on Clarendale of Algonquin, northwest of Chicago. The $40 million project will offer 186 units.
While affordable apartments are easy to fill, picking the right location for the market-rate projects is key, says Ryan’s Erickson. “The demographics and incomes have to be there.”
In California, Azulon project manager Reese says his team has discussed the problem of aging in place. He knows it’s an issue with any age-restricted project. At some point, he fully expects to have conversations with adult children about their parents who are Azulon residents and need help.
But Reese considers his project a real estate play rather than an operating business like continuing care and assisted living communities. And, for now, he enjoys seeing the residents engaged in the lifestyle at the property.
When Reese walked through the community on a recent morning, residents were using the pool and the fitness building. Someone was reading in the garden. Reese observed a few others walking to the adjacent shopping center.
“Watching the community materialize is a rewarding experience.”