Needs-based housing has fared pretty well during the residential downturn. Elderly persons who really need help with the activities of daily living can’t wait for the housing market to improve before they sell their homes and move to an assisted living or nursing care facility.

With a slightly different take on needs-based housing, Resort Lifestyle Communities is developing independent living buildings. The company recently broke ground on Provident Crossing in Round Rock, Texas, near Austin. The $22.5 million independent living building features 128 units and is slated to open in the spring of 2011.

Resort Lifestyle, based in Lincoln, Neb., has six other properties, two of which opened in the last 18 months. The privately held company’s buildings feature only independent living apartments. The buildings offer meals, housekeeping, and activities.

Redefining needs-based living

“There’s a reason a potential resident walks through our door,” says Jerry Flentje, vice president of sales and marketing at Resort Lifestyle. Though residents must be able to manage alone in their own apartments, Flentje disputes the argument that the buildings aren’t needs based.

Residents move in because they’re lonely, or because they don’t want to handle the upkeep of a house, Flentje argues. Or perhaps they want a fitness program or sound nutrition. “These are real needs,” says Flentje. “If these people didn’t have a real need, they wouldn’t come here.”

The average age of residents at Resort Lifestyle buildings is 85. Many operators try to attract younger residents, says Flentje. “But it’s not going to happen.” A better approach is to cater to that older age group and offer them the services they need.

At Resort Lifestyle properties, managers live on site. A round-the-clock concierge is available to park cars, carry groceries, or do other tasks for residents. Home health services, if needed, can be brought into the units.

The housing downturn has hurt move-ins, Flentje acknowledges. But the occupancy rate portfolio-wide is up 19% over last year, a number that includes the two new buildings in lease-up. The average occupancy at stabilized buildings is currently 84%.

Cash-on-cash returns — or the annual before-tax cash flow divided by the total cash invested — are 15% to 20%.

Customer service a top priority

The buildings target residents whose income is in the upper one-third of the market. Rents average about $2,700 a month. Apartments range in size from about 600 sq. ft. up to 1,250 sq. ft. Each unit includes a full-size kitchen.

The buildings feature an in-house bank, beauty and barber salon, and a fitness center designed for older people. A theater with a 27-foot screen seats 150 people.

Residents have month-to-month leases. The monthly fee is guaranteed for 12 months, but residents can vacate with 30 days notice without a penalty. “We have to provide good customer service or they leave,” notes Flentje.

Several programs have helped to boost move-ins. The company offers a “freedom dining” program at its new buildings. Meals are available throughout the day instead of at regulated times, though a formal sit-down meal is offered each evening in the main dining room.

Resort Lifestyle rarely offers financial incentives, but the company has recently modified its sales program. Previously, the community manager was responsible for sales as well as for all building operations. Now each property has a dedicated sales person who handles the process up until move-in day.

Financing new projects is still a struggle, Flentje admits. Wells Fargo & Co. provided construction financing for Provident Crossing. Lenders want to see positive revenues and rising occupancies, says Flentje. “We are performing, and that’s what lenders want.”

The road ahead

Resort Lifestyle plans to expand. Two more projects are expected to be under way by the end of 2010. One of the new projects is in the Southeast, though Flenjte won’t say exactly where.

The company also likes the Southwest, especially Texas. And though the company is headquartered in the Midwest, no more projects are planned for that region.

“We are still small enough to be nimble and to innovate,” says Flentje. “We are positioned to grow.”