Service-enriched condos are emerging as the latest niche in seniors housing. Developers and investors are dabbling in for-sale residential product to capture a bigger slice of the mature market, though, experts say, condos won't replace rentals as the primary seniors housing model.
"A certain segment of seniors feels that homeownership is important," says Bob Gawronski, vice president of development at Chicago-based Senior Lifestyle Corp. "Moving to a rental apartment is not an option for them." Senior Lifestyle, which has 41 communities in nine states and over 4,200 residents, has two condominium projects now under way.
Of course, the condo's main benefit is that the owner gains from appreciation at resale. But seniors-only condominiums are different from conventional ones. Condos for seniors usually target the well heeled, and, of course, the buildings are age-restricted. Residents must be age 55 or older.
Another key difference: services. These typically include meals, housekeeping and transportation — the add-ons usually only found at upscale rental buildings. Monthly building assessments cover services, or residents pay as they go.
Condo developments for seniors feature anywhere from about 50 to 200 units. Prices start at about $200,000 and go as high as $2 million in some locations. Monthly fees, depending on the services included, range from about $500 to $4,000.
Tracking the market
The number of seniors-only condo projects hasn't been tracked, though the National Investment Center for the Seniors Housing and Care Industry (NIC) has plans to do so, according to NIC research director Michael Hargrave. He figures about 30 to 40 condo projects are currently under construction.
Giant assisted-living facility owner Sunrise Senior Living Inc. (NYSE:SRZ) is developing several condo projects. Another 10 are in the pipeline. The projects are located in major metro areas in California, Michigan, Virginia, Maryland and Florida. Most of the buildings are being marketed under the brand name “The Sterling.”
"There is significant demand for many different housing concepts, and [the condo] is one," says Phil Downey, senior vice president of strategy and research at Sunrise in McLean, Va. Sunrise has two condo formulas: full-service; and what the company calls its condo for life.
The full-service building offers services similar to those found at continuing care communities, including meals, housekeeping and even assisted living care. The condo for life features a limited-service package. Meals and housekeeping are provided, but on-site assisted living is not.
"The service component is a big part of the value," says Downey. "If someone was looking just for a condo, [he] wouldn't come to our buildings." The condo-for-life buildings, slated for urban and suburban in-fill sites, feature about 120 units. The full-service condos are somewhat larger properties with about 170 units. At Fox Hill, the Sunrise project in Bethesda, Md., prices per unit range from the mid-$400,000s to $1.5 million.
After the units are sold, Sunrise retains ownership of community space and the assisted living component. "Sunrise remains the operator of the building," notes Downey. He explains that the condo association is structured to make it difficult to remove Sunrise as the property manager. "People are buying the Sunrise name."
Condos as an investment
At Senior Lifestyle, condos are part of a short-term investment strategy, in contrast to the company's rental apartments, which are held for up to 30 years, Gawronski says. "The condos allow us to get a quicker return and access other investors."
Also, the condo projects sit adjacent to rental buildings where condo residents can purchase services. "We can capture service income that way," says Gawronski.
But condos don't work everywhere. "Location is a wild card," admits Gawronski. "What works in one community may not work in another." In one Chicago neighborhood, it took time to educate consumers about the service-enriched condo concept, he explains.
Where's the trend headed? Expect more condos, but, experts say, it may take time for the idea to catch on. "The jury is still out on condos with services," says Derrick C. Dagan, research analyst at Nashville-based Avondale Partners LLC. "It's something developers are trying out."