As developers shelve plans for new projects because of the struggling economy, one company is forging ahead. Spectrum Retirement Communities plans to start three new rental buildings in 2009. Three other projects are now under construction.
"We feel confident we have the right formula," says Lynn Wallace, vice president of marketing at Denver-based Spectrum. Still, she admits the economy has curbed development activity at the company, which had previously planned to build twice as many new buildings in 2009.
Construction of new seniors housing units has slowed over the last year because of the credit crunch, according to a report by the American Seniors Housing Association and the National Investment Center for the Seniors Housing & Care Industry (NIC). Though projects already under construction are expected to open in the next two years, new product should be scarce after 2011.
Spectrum's properties under construction include Shawnee Hills, a 120-unit independent living community in Shawnee, Kan., slated to open Feb. 1; Lincoln Meadows, a 212-unit independent living and assisted living community in Parker, Colo.; and Lakeview, a 129-unit community in Lakewood, Colo. Projects scheduled to break ground in 2009 are in Afton, Mo., Peoria, Ariz., and Cary, Ill.
Privately held Spectrum is about five years old. The company owns and operates 17 buildings, most of which were acquired. The properties typically include about 125 units. Most buildings have a mix of independent and assisted living units.
The new projects cost less than $50 million to build, Wallace says. "We don't build huge campuses, but we try to build something that will fill fast." She thinks large, $100 million-plus projects have a greater likelihood of getting into trouble nowadays.
Spectrum is tweaking its formula, however, adding more assisted and memory care units to its properties. The new building in Parker, Colo., south of Denver, features 132 independent living apartments on one end of the facility. The other side features 64 assisted living apartments and 16 memory care units. A “town center" with amenities connects the main sections.
Spectrum is experimenting with another housing model, too. Some buildings with independent living units include an on-site office that offers home care services. Residents can buy services so they can stay in their independent apartments as they age. Spectrum does not own the home care service, but contracts with a licensed provider. Residents who need home care services are not obligated to use the on-site provider.
Spectrum doesn’t target the luxury market. "We don't want to have the highest or the lowest rents," says Wallace.
Rents for independent apartments at its new community in Parker, Colo., range from $1,800 to $3,800 a month. Rents include all services such as meals and housekeeping. Assisted living rents are about $1,000 to $1,200 higher. Residents also pay a one-time $1,000 community fee. Leases run month to month and can be cancelled with 30 days notice.
New buildings are expected to take longer to lease because of the faltering economy, Wallace says. The company previously planned for an 18-month lease-up period, but now Spectrum anticipates a two-year process. "It won't hurt us dramatically," says Wallace. "We still feel it's obtainable to hit 90% leased in 24 months."
Two new properties that opened in the last six months are already 50% leased. One is located in Overland Park, Kan., and the other is in Crestwood, Mo. "I'm shocked to see how quickly these buildings are filling up," says Wallace.
Spectrum also owns five properties in the Detroit area. Wallace says occupancies there are holding up well. But, she adds, "It's a depressed market."
Spectrum offers its residents assistance with home sales. Spectrum also has had some success by helping new residents rent out their homes.
Wallace won't say what financial returns the company generates on its projects. The plan for the near term is to hold and operate the properties. "We are not planning to sell."