Development Magazine Winter 2016/2017

Development - Ownership

Seniors Housing Moves Downtown

The Kilpatrick Renaissance in Chicago’s Portage Park neighborhood features 98 independent living units. It is designed to resemble a row of townhouses.
Darris Lee Harris LLC

Seniors’ desire to live in urban settings is creating new opportunities for developers.

MOST COMMERCIAL real estate experts recognize that a large percentage of young professionals are drawn to downtown living. But what about retirees? Like their younger counterparts, seniors are a large and diverse cohort that seeks out a variety of living situations, including an urban lifestyle. Some have always lived in cities and don’t want to lose the lifestyle they love, while others move downtown to take advantage of the urban amenities they now have the time to enjoy. They want walkability, convenient transportation and easy access to the amenities only a city can provide.

Developers are addressing these demands with downtown communities that provide maintenance-free homes for active seniors, and/or varying levels of care for those who require assistance with day-to-day living. These communities include high-end luxury homes as well as affordable housing options. Increasingly, they are rental communities, rather than ownership properties with high entrance fees.

Developers encounter challenges with urban products, but also find opportunities and rewards. Often, developing an urban project means working on an infill site, which can pose logistical challenges, higher costs, NIMBY issues and, sometimes, the need for environmental remediation. But these higher barriers to entry usually also mean less competition, more pent-up demand and the chance to add value to an existing neighborhood.

Several recently developed seniors housing projects illustrate how developers have embraced urban locations. All are rental communities that are owned and managed by the developers.

The Kilpatrick Renaissance

The Kilpatrick Renaissance provides 98 independent living units for those aged 55 and over with modest incomes. It is located in Portage Park, a middle-class neighborhood less than 10 miles north of Chicago’s Loop. The building occupies a 1.14-acre site on a short street, providing a cul-de-sac level of quiet and privacy.

Development Goals. The site, formerly an industrial property, was once slated for market-rate multifamily development. But when the financial crisis hit, Chicago-based Renaissance Companies saw an opportunity for affordable age-restricted housing. Jeanmarie Kapp, the company’s chief operating officer, says the site was ideal because of its proximity to grocery, drug and other stores as well as banks, restaurants and a range of transit options, including several rail and city bus lines.

The planning, approvals and development processes were relatively smooth. The approvals process was facilitated by a local alderman, who took time to work with the community and ensure that all of their concerns were addressed. The project broke ground in October 2013 and was completed in June 2015. It was fully leased by December 2015.

Worn Jerabek Wiltse Architects, P.C., took a new urbanist approach for the structure. The four-story building is sited close to the street and has an articulated brick and stone facade that emulates a row of townhouses. Open space is set behind the building for privacy. Beneath the facade is a structure of precast concrete, made off-site, that reduced construction time and costs and is an excellent insulator. The project is built to Energy Star standards, with a high-efficiency roof, windows, HVAC system, appliances and lighting. A cistern is used for landscape irrigation.

The project was financed through low-income housing tax credits (LIHTCs) and funding from LISC’s National Equity Fund. (LISC, the Local Initiatives Support Corporation, is a nonprofit community development financial institution.) The project gained points for LIHTC financing because of its proximity to public transit and shopping, as well as an experienced development team.

The Community. The Kilpatrick Renaissance’s design helps to integrate it into the neighborhood, and many neighborhood amenities and services are a short walk away. Within the building are community spaces that include a passive solar solarium with a grand piano, a club room, a library/computer center, a fitness center and a kitchen. Laundry facilities are located on each floor.

The property contains a mix of studios and one- and two-bedroom apartments. Seven units are market rate, 10 are for residents with very low incomes (15 to 30 percent of area median income, or AMI), 80 are for those with low incomes (50 to 60 percent of AMI) and one is set aside for a staff member.

The majority of residents are from the Chicago metro area. Those from out of town have moved to be near adult children. Seniors typically take longer than other renters to make a moving decision, so it’s important to not rush the process. “We work with adult children, explain what the building is all about, who we are and so on,” says Kapp.

The Developer. Renaissance Companies is a women-owned firm that has been in the property management and development business for more than three decades. It specializes in small and midsized urban projects, mostly in Chicago, and in affordable and market-rate housing and commercial projects. Kilpatrick Renaissance is one of four seniors residences the company has developed.

Kapp notes, “Affordable housing is a greatly underserved market. It is a good niche for Renaissance because years of experience have given the company the skill to do it right.  We are adept at producing a high-end product at an affordable price.” She adds that “This project has made a positive impact on the community by providing this kind of housing and fitting in with the neighborhood aesthetics.” The Renaissance Kilpatrick was named the 2015 “Best Affordable Senior Housing Design” by Senior Housing News.

Balfour at Riverfront Park

Located in downtown Denver, Balfour at Riverfront Park is a luxury 202-unit continuing care retirement community (CCRC) providing residences for independent living, assisted living and memory care. The site faces two parks and is within a few blocks of downtown’s cultural and recreational amenities.

Balfour CCRC

Balfour at Riverfront Park, a 202-unit luxury CCRC in Denver, consists of two buildings connected at the upper levels.
Frank Ooms Photography

Riverfront Park is a 23-acre master-planned infill development that was instrumental to Denver’s downtown revitalization. Formerly a rail yard, the brownfield redevelopment is the result of work begun in the 1990s by a team now led by Colorado-based East West Partners. Harry Frampton, founder and chairman of East West, wanted to create a real community - not just one for young professionals, but for people of all ages. To develop housing for an older demographic, he approached his long-time friend, Michael Schonbrun, founder and CEO of Balfour Senior Living.

Development Challenges. Schonbrun spent several years searching for an equity partner for the project. Investors wanted to see examples of successful urban seniors’ housing developments but, at the time, there were very few. To get the project going, Schonbrun purchased the site with personal funds and a mortgage. One equity partnership fell apart when the Great Recession hit. After the economy recovered in 2011, Schonbrun sought a new partner and had plenty of offers.

Neighborhood opposition was another challenge that considerably lengthened the development timeline. Neighbors raised concerns about the building’s height, its proximity to their homes and its impact on views from existing apartments.

By right, Balfour could develop a seven-story building with no setbacks. Once neighbors got involved, compromises had to be reached. The building envelope was reduced, setbacks were added and fenestration was increased to improve aesthetics for surrounding neighbors. The final plan was for two connecting buildings facing an interior courtyard. The larger building would be five stories; the smaller would be three stories.

A third challenge ultimately became an asset. Originally a train depot, the Moffat Building is a historic landmark located at the front of the site. Built in 1906, the Georgian revival structure was in disrepair, but after a restoration that included asbestos removal, a new roof and extensive rebuilding of the interior, the building was transformed into the community’s great room. Its tall Palladian windows became a design motif for the rest of the project. Balfour broke ground in April 2013 and opened in October 2014.

The Community. The independent living component occupies the larger building. Assisted living and memory care facilities share the smaller building. Community amenities include housekeeping services, valet parking, three fine dining rooms, a rooftop bar with an outdoor terrace, a spa, an indoor saltwater swimming pool with skylights, and a gym with equipment specially adapted for seniors. A bar/club room is outfitted with a “hearing loop” that transmits clear sound to those with hearing aids during presentations or other events. The memory care section features a landscaped interior courtyard that enables residents to enjoy the outdoors in a secure environment.

About half of Balfour’s residents relocated from out of state, generally to be near their adult children. Others came from the Denver area, pleased that they could remain in the city while gaining the convenience and security of a seniors residence. Residents’ ages range from the late 60s to late 90s. The community’s youngest residents are younger than those usually attracted to seniors housing. Many residents who had originally thought they would downsize first to a condominium, then eventually move to a seniors residence, decided to skip the intermediate step when they saw how appealing Balfour was.

Balfour Senior Living has completed and manages five projects in Colorado. The company is looking to expand its urban model into more cities. Says Schonbrun, “There’s so much to do in the city. Older people who are used to urban amenities don’t want to move to the suburbs when they downsize or need care.”

Village Place

Opened in 2015, Village Place is located in Fort Lauderdale’s Flagler Village, a revitalized downtown neighborhood. Redeveloped in the early 2000s with townhouses, condominiums and rental apartments as well as cafes and art galleries, the former warehouse district is now among the city’s most desirable neighborhoods.

affordable independent living

Architect Sotolongo Salman Henderson of Miami designed the six-story Village Place, a 112-unit affordable independent living project in Fort Lauderdale.
Argo Studio, Inc.

Developed, owned and managed by Housing Trust Group, Village Place is an affordable, tax credit-financed independent living community. (It does not provide meals or health-related services.) Residents, who must be at least 55 years old, are screened to ensure that they are healthy enough for this kind of living situation. Ninety percent of the units are reserved for those with incomes at or below 60 percent of AMI. The remaining 10 percent are for residents whose income is at or below 25 percent of AMI.

The Development Process. Housing Trust Group purchased the vacant site in 2011 from a bank that had acquired it in a foreclosure during the Great Recession. The sale of the property included plans for a market-rate condominium project. Village Place was built according to these plans and specifications, with amenities added to meet the needs of seniors.

Producing such a high-quality product for an affordable market was not easy. It was made possible through a financing package that included competitively awarded 9 percent

LIHTCs, which generated considerably more equity than the more common non-competitively awarded 4 percent tax credits. (The 9 percent tax credit is designed to subsidize 70 percent of the eligible development costs for a project without any additional federal subsidies; the 4 percent tax credit subsidizes only 30 percent of eligible costs for a project that receives additional subsidies. The funds raised from the sale of the tax credits to investors are used as equity financing for the housing project.) One reason the project qualified for 9 percent LIHTCs is that it, like the Kilpatrick Renaissance, is easily accessible by transit.

“A certain level of neighborhood opposition is always a part of developing an affordable project,” says Housing Trust Group CEO Matt Rieger. In the case of Village Place, initial neighborhood resistance was overcome with determined outreach, relationship building and education. A well-designed product also calmed neighbors’ skepticism. Today, Rieger says, “the senior housing community enjoys excellent relationships with its neighbors, who appreciate the need for low-income seniors to have safe, clean and attractive housing in a part of the city where they can access transportation and other services.” He adds that the location is “amazing” for this project, and is pleased that Village Place helps to create a well-rounded neighborhood.

The Community. The six-story building includes 82 one-bedroom/one-bath units and 30 two-bedroom/two-bath units. Finishes and features are typical of a market-rate condominium property. All units have outdoor balconies, full-sized washers and dryers and kitchens with granite countertops. The project was constructed in accordance with the National Green Building Standards (NGBS), a residential green building rating system. Eco-friendly features include low-flow plumbing fixtures, low-VOC (volatile organic compounds) paint, Energy Star-certified appliances and windows, and energy-efficient heating, ventilation and air conditioning (HVAC) systems.

Project amenities include a gated entrance, garage parking, a rooftop pool with ocean views, a fitness room, a community room with computers and Wi-Fi access throughout the building. A calendar of social events includes activities such as bingo and movie nights.

Rieger says, “There is incredible demand for affordable housing. The project was 100 percent leased on opening day, and remains fully occupied with a waiting list of more than 100 people.”

Housing Trust Group, which was founded in 1998, has grown considerably under the leadership of Rieger, who joined the firm in 2004 and became president and CEO in 2010. The firm operates primarily in Florida, but is also branching out into Tennessee and Arizona.

The Cardinal at North Hills

The Cardinal at North Hills, nearing completion in the summer of 2016, is a CCRC that will include 225 rental units providing independent living, assisted living, memory care and skilled nursing facilities. It is located in the North Hills Midtown District, a 7 million-square-foot master-planned development in Raleigh, North Carolina, that began as the adaptive reuse of an outmoded suburban shopping mall. The city of Raleigh is growing rapidly, and this once-suburban area is now an emerging edge city. North Hills features a range of housing, hotels, office space, stores, restaurants and recreational facilities. Kisco Senior Living broke ground on the Cardinal in April 2014 and expects it to be ready for residents in January 2017.

The Cardinal CCRC

The Cardinal at North Hills is a 225-unit CCRC being developed in Raleigh, North Carolina.
Cline Design Associates, Raleigh, North Carolina

Planning and Marketing. Before developing the Cardinal, Kisco already owned and operated three senior living communities in greater Raleigh, and was familiar with the market. Company representatives looked at the North Hills site before the Great Recession, but were hesitant to commit. Returning in 2011, they were ready to go forward. Mitch Brown, chief development officer for Kisco, says, “We love this location. Urban is the future of senior living. As baby boomers approach retirement there will need to be choices for everyone. And a lot of the next wave of seniors will be attracted to these kinds of environments.”

Marketing for the project began in 2015, and the Cardinal was 80 percent preleased well before opening. Part of the marketing strategy involved creating a “virtual community” before the project opening. Kisco established a dining club and a travel club; it has also hosted a variety of events as a way of introducing the Cardinal’s lifestyle and enabling residents to get to know each other before they become neighbors.

The Community. Brown calls the Cardinal “a CCRC without walls.” The project fronts on Midtown Park, a lively urban plaza with a full calendar of events and activities. The location provides much of the project’s amenity package, with lots of restaurants, shopping, theaters, the park and other attractions, all in a walkable environment. The Cardinal’s on-site amenities include several dining venues, a resort-quality spa, a lap pool, party spaces and underground parking. Services include meals, housekeeping and a shuttle. The project includes a mix of one-, two- and three-bedroom units.

About 80 percent of those who plan to move in are from the local area. Raleigh has a large population of educated, successful professionals whose parents have followed them to the area. These parents are a prime market segment for the Cardinal. Says Brown, “CCRC residents are planners. They know they don’t want to be a burden on their children. In retirement, they want peace of mind and they want to have a great time.”

Kisco Senior Living, based in Carlsbad, California, owns and operates 22 communities nationwide and has been moving toward a more urban model. Kisco’s most recent project before the Cardinal was Sagewood at Daybreak, in South Jordan, Utah, which takes advantage of a town center location. The Cardinal takes urbanity a step further.

Other Examples

Urban seniors’ projects are being developed across the U.S. In downtown Honolulu, Kalakaua Gardens, a luxury rental community, opened in mid-2016 and offers 236 units of independent living, skilled nursing and memory care housing. The project is managed by Avalon Health Care Group.

seniors housing projects summary

In Denver’s Uptown neighborhood, 5280 Senior Residences is a 99-unit affordable rental apartment complex being developed by Burgwyn Co. and built by Shaw Construction. Completion is expected in mid-2017.

At least two projects are in the works in New York City. In midtown Manhattan, seniors housing developer Welltower Inc. has partnered with Hines to develop a luxury high-rise that will offer assisted living and memory care housing. A partnership between Maplewood Senior Living and Healthcare Investors is planning a high-rise seniors project on the Upper East Side.

Developers’ Advice

Balfour’s Michael Schonbrun notes that urban land is more expensive than suburban land, and that because urban sites tend to be tighter, the development process may be more difficult and expensive. There may also be more community resistance because of the proximity of a denser group of neighbors. Because development can take longer, carrying costs can also be higher. Renaissance Companies’ Jeanmarie Kapp agrees. “Infill development is always challenging, due to site constraints, lack of staging areas, large truck logistics, competition for street space and proximity to utility poles.” She adds, “You need to work closely with local representatives to facilitate approvals and neighborhood buy-in.”

Kisco’s Mitch Brown advises developers to “plan, plan, plan. Experience only takes you so far.” Because every location is so different, his firm engages in a great deal of front-end consumer research and premarketing, including holding small focus groups to study each project’s look and feel, the architecture and the service model. Housing Trust Group’s Matt Rieger agrees that careful planning is key, along with determination and perseverance. “While Village Place appears to be an overnight success, it really took nearly 10 years of preplanning and development.”

Brown notes, “The “operator/owner/developer model is a major strength, because having experience managing projects helps [us] to understand how the project should be designed and built. Senior housing is a service business more than a real estate business. Real success comes from the management team. If you don’t get the culture right, you won’t succeed.”

Related Links

future office buildings

The Future of Suburban Office Buildings 

What features will suburban office buildings need to attract tomorrow’s tenants?

regional mall conversion

Atlanta Metro Studios And Union Station Business Center 

A fully leased business center with movie production studios and a distribution center has risen on the site of a former Atlanta-area mall.

From the Archives: Development Ownership Articles from the Previous Issue

Thompson hotel exterior

Touchstone: Small Team Big Impact 

This year’s award winner — which prides itself on creating shared value for owners, tenants and the community — developed more than 2 million square feet of space in 2015 with a staff of 10.

Method manufacturing facility

The Natural Capitalism Concept Comes to Industrial 

Method’s new soap factory in Chicago’s Pullman neighborhood has resulted in a more profitable, localized supply chain

Selected For You

decision makers chart clip

Building the Tenant Experience 

Political strategists have refined the use of predictive analytics; commercial real estate executives should follow their lead.

lease agreement

Accounting Changes Coming for Leases 

New guidance from the Financial Accounting Standards Board will change how tenants account for leases in coming years.