Leasing activity at seniors housing buildings has picked up in the last two months, property managers say. But they still face the question of how much to bend on rents and whether to offer concessions to fill rooms.
At least one company doesn’t believe in price breaks. “It’s all about service at the end of the day,” says Michael Grust, president and chief executive at Senior Resource Group, an owner and operator of upscale buildings primarily targeting independent seniors. “If you sell price, that’s a mistake that lingers.”
Based in Solana Beach, Calif., Senior Resource Group recently opened the Village at NorthRidge. The 275-unit building is situated on five acres in Northridge, Calif. The project includes 240 independent living and 35 assisted living units. The all-rental building has an average monthly rent of about $5,500.
Grust describes the building design as “timeless contemporary architecture.” And, he says, it sets the bar for the next generation of seniors housing buildings. But services and amenities are the real selling points.
The building boasts a large restaurant, plus other dining venues. Meals are available 12 hours a day. “It’s one of the features that separates us from our competitors,” Grust emphasizes.
The building also features an Internet lounge, three fitness areas including one for residents to play Wii video games, a swimming pool and spa, library, art gallery and on-site bank. Other amenities include a movie theater for 40 people as well as a kid-friendly room where residents can entertain their grandchildren.
Rent includes a full breakfast plus lunch or dinner, weekly housekeeping, linen services, transportation, and activities. Units feature walk-in closets and full kitchens. Most units have covered patios or balconies.
So far, about 65 units have been leased. The first group of residents did receive some “extras,” says Grust, such as a credit to help with moving costs. But Grust quickly adds that he’s wary of concessions and how they affect the company brand.
“You spend a lot of time and energy listening to the market, coming up with a terrific design and creating programming,” he notes. “If you devalue what you’ve done, that’s a mistake.”
The Senior Resource Group owns and operates 15 buildings. The company also manages 40 buildings under the LaVida brand name, targeted at middle-income retirees. Bankrupt Sunwest Management, based in Salem, Ore., previously owned the LaVida buildings, which are now owned by the Lone Star Funds of Dallas.
Grust says Senior Resource Group prefers to develop its own projects, with an emphasis on upscale rental communities. The NorthRidge project offers a one-year lease with a 60-day cancellation clause. “We like the rental model,” he notes. “It offers residents a lot of flexibility.”
The company’s portfolio consists of about 75% independent living units and 25% assisted living units. “We are sticking to the service-enriched independent living buildings,” says Grust.
Not all of the company’s projects are rental buildings, however. Senior Resource Group currently has an entrance fee community, Maravilla Scottsdale, under construction in Arizona. The resort-style continuing care property includes about 400 units. Entrance fees start at about $300,000. The property is expected to open in the spring of 2011.
Two other new projects are being planned and should be announced soon, says Grust. The company also is considering the purchase of six existing properties, though Grust declined to provide details.
Regarding the outlook for seniors housing, Grust says that “the fog is starting to lift.” He contends that the paralysis that gripped seniors in the wake of the economic meltdown is starting to abate.
Seniors are now realistic about what price they can get for their homes and they’re ready to move on with their lives, Grust believes. “We see acceptance among consumers.” He predicts that pent-up demand will fuel new development, but in a measured way.His company’s strategy is the right one going forward, Grust is convinced. Quality property management has a lot to do with the consumer’s decision-making process. People want to know who they can depend on to care for mom and dad in a consistent way, Grust emphasizes. “It’s all about service.”