With roots in the hotel business, Classic Residence by Hyatt continues to expand its seniors housing holdings as its new $150 million continuing care project near Denver gets under way.
Expected to open in 2008, Classic Residence by Hyatt in Highlands Ranch will include 252 units for independent seniors, 14 units for assisted living, 12 for memory support and 28 for skilled nursing.
With its luxury apartments, fancy restaurants and upscale amenities, the project is typical of Classic Residence developments that cater to wealthy seniors. “Classic Residence by Hyatt has really translated the quality of the Hyatt brand into luxury senior living,” says Randal Richardson, president at Classic Residence by Hyatt, a sister company of hotelier Hyatt Corp.
Classic Residence owns and operates 10 rental properties and eight continuing care projects. The company currently has 5,800 units nationwide and another 1,150 units under development at four projects, all continuing-care communities. Besides Denver, the other new projects are in Texas, California and Arizona.
The projects include many of the same features as a luxury hotel, such as a concierge, valet parking and fine-dining restaurants. “We want to have the dominant position providing luxury living to older adults,” says Meg Ostrum, senior vice president of sales and marketing at Classic Residence, a private company held by Chicago’s billionaire Pritzker family. An outside source pegs annual revenues at about $260 million.
Seniors housing seems like a natural fit for a hotel company because both are service-rich businesses. But few hotel operators have ventured into the space. Marriott International exited the seniors housing business in 2002 when it sold its 126 assisted living buildings to Sunrise Senior Living. At the time, Marriott said that it wanted to focus on its hotel management and time-share properties. Sunrise paid $89 million for the portfolio.
In some ways hospitality and seniors housing are similar, observes David Schless, president of the American Seniors Housing Association based in Washington, D.C. In Marriott’s case, Schless thinks it was too demanding for a hotel company to develop and lease up so many assisted living buildings quickly.
In contrast, Classic Residence has taken a methodical approach. Though the company started by developing luxury apartments for seniors, it now focuses on continuing care communities.
Hyatt doesn’t mix its hotel and seniors housing operations. Each is run as a separate company. “While we do share the hospitality heritage that Hyatt is famous for, our businesses are really quite different,” says Richardson of Classic Residence.
The average construction cost of a Classic Residence continuing care project is about $150 million. Unit prices are targeted at the median home value in the local community. In pricey locations, like Palo Alto, Calif., the entry fee is as much as $4 million. Ostrum indicates that the continuing care developments generate better returns than the rental buildings.
Continuing care projects can be risky ventures, observers say, and Classic Residence is one of only a handful of for-profit companies developing these projects. Classic Residence will continue to seek out development opportunities, Ostrum says. “We like the niche we’re in.”