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Posted: August 17, 2009

Q3 real estate report: Senior housing loses steam to recession

While some major projects have opened, others have stalled due to the financing crunch and lower demand

David Lewis

Senior citizen developments take place at the intersection of two truisms: “demography is destiny,” and “location, location, location.”

Unfortunately, the economic meltdown has made mock of these truths, turning them into un-truisms.

Take the case of senior homes. On one hand, while residential and commercial real estate markets muddle through the downturn, communities targeted to senior living continue to pop up along the Front Range.

On the other, developers this year began to bow to economic pressures even greater than the economic and demographic forces that just a year or two ago seemed poised to push demand for senior development in Colorado … forever.

A few examples:

In June 2008, Catonsville, Md.-based Erickson Retirement Communities, a nonprofit, announced plans for Tanglewood Creek. The development was to be a 67-acre senior community in Westminster. “Customer interest in the project to date has been extremely positive, with more than 1,600 people inquiring about Tanglewood Creek even before the Welcome Center opened for business and an additional 450 people requesting information since that time,” a company press release  says.

The demographic favored success, the company noted, since about “194,000 people age 65 and older live within 25 miles of the site.”

In the first quarter of 2009, after “due diligence and a look at the demographics, cost of construction and whatever, we decided not to pursue that one. Nothing ever really got off the board on that one,” spokesman Mel Tansill says.

When the economy heals, “We would like to revisit the possibility of another site in the Denver area at some point,” Tansill says. “It may not be that specific locale, because our due diligence says it was not suitable.”

Last year, Erickson says it had opened or planned 22 communities. This year, the number has declined to 19. One of those is Wind Crest, in Highlands Ranch, and more on that later.

This May, McClean, Va.-based Sunrise Senior Living Inc., a New York Stock Exchange-traded company, opened the lavish Stratford complex in Broomfield. Called by The New York Times “the industry’s gold standard,” that same month the company announced the resignation of its chief financial officer, while fending off stories that it would be forced into bankruptcy with the announcement that it had developed a plan to cut $20 million in non-health care overhead.

Sunrise Senior Living — with 435 senior communities and about 54,000 residents in the U.S., Canada, Germany and the United Kingdom — a few days later announced its first quarter results: revenues of $404.4 million for first quarter 2009, compared to $413.5 million for first quarter 2008; and a net loss for the first quarter of 2009 of $18.2 million, compared to a net loss of $33.1 million in first quarter 2008. The company also said it would complete the 14 communities it has under construction in 2009, but would not initiate any construction starts this year in the U.S., Canada or the U.K.

The good news is, in March, Greenwood Village-based, not-for-profit Christian Living Communities said it had successfully issued $30 million in bonds, which it plans to use for the first phase of the redevelopment of its Clermont Park community in Denver. The firm’s bonds offer a 8.45 percent return and are double-tax exempt.

The not-so-good news is, ”We are actually the only non-rated entity that has successfully accessed the credit market this year,” says president and CEO Russ DenBraber.

“Typically, historically, there have been from three to five of those deals done per month nationally in the senior living industry. They are not unusual for senior living providers, especially the relatively small ones,” DenBraber says. “Ours is the only one that was done between September 2008” and July 2009.

That’s the bad news, folks. The good news is there has never been a better time to retire to a Colorado retirement community.

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Interior of the Town Center at Holly Creek. Photo courtesy of McCory James

Take the case of The Stratford, developed by beleaguered Sunrise Senior Living. While many or most senior homes require a hefty deposit (sometimes wholly or partially refundable when the resident moves or dies) Sunrise pioneered the concept of senior condominiums. That means the major move-in cost is a base fee ranging from $2,795 for a one-bedroom suite, to $3,900 or so, for a two-bedroom suite.

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The Stratford

For that relatively paltry fee residents receive medical and other services that put most four- or five-star hotels to shame.

On the lifestyle and amenities side of things, luxuries range from the almost prosaic — such as weekly housekeeping, room service and individual thermostats and air conditioning in the suites — to the spectacular — soaring atria, formal dining plus a bistro, an in-house theater, a full-service spa, an art studio, and an overall sense of detail and sweep.

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The facility’s capacity is 206 residents, 130 in its independent living portion, and 76 in assisted living. As of July, 30 people had moved in. Sunrise has a two- to three-year “fill cycle,” says executive director Jenny Teague, meaning the company expects to reach capacity in that amount of time.

The bad economy has had other effects, too. “The housing market in general is difficult, especially for seniors who have lived in their homes for 50 years. Trying to sell those in this market, they may not get what they need.”

Thus, Teague says, “I and my marketing team work closely with Realtors who have had great success with the senior population selling those homes. Sometimes they have to do a little bit of flipping. They have to go in and do some minor things to the home that are more aesthetically pleasing. We were worried about that last October a lot. It has actually gotten a little bit better since February.”

Teague points out that the tough economy has made no difference to The Stratford’s luxurious appointments.

“Construction never stopped, and as you go through the community you can tell from the amazing features and amenities nothing was cut short or skimped on in any way,” she says.

Much the same holds true of Lakeview Senior Living in Lakewood and Lincoln Meadows Senior Living in the Meridian area, both built by Denver-based Spectrum Acquisition Partners.

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Lakeview Senior Living opened in June in Lakewood

Lakeview Senior Living opened in June, Lincoln Meadows’ independent living section in late July. Each charges a $2,000 move-in fee, then a monthly lease. Lincoln Meadows asks from $1,995 to $4,700 per month for units ranging including studios, one-bedrooms and two-bedrooms.

Lincoln Meadows facilities include independent living, assisted living and, in a secure facility, memory care. Amenities include the by-now de rigueur theater, formal dining room, lounge, bistro, beauty shop, wellness center and greenhouse.

Technology plays an important part in modern senior complexes such as The Stratford. Not long ago, seniors struck by sudden illness might be able to contact help by pressing a button on a fixed panel — if they could find a way to reach it. Now, if they like, they can wear  wireless pendants that fulfill the same purpose.

The Stratford also offers the latest in Alzheimer’s care. This includes small
touches such as “memory baskets,” baskets of cooking items or sewing materials that engage memory-challenged residents and, it is hoped, spark old memories while creating fulfilling new ones.

Christian Living Communities’ Holly Creek, in Centennial, takes a similar approach. A luxury complex, it offers cottage homes or apartments with balconies or terraces, a full-time chaplain, a fitness center, indoor outdoor heated pool, a library, a salon and barbershop, and a spa with massage therapist, among other amenities.

Both Holly Creek and The Stratford, by the way, offer Snoezelen rooms, in which sensory stimulation from visual imagery to aromatherapy is used to calm agitated elders.

Holly Creek also offers emergency pendants, and its technology-minded CEO also has it participating in the beta-testing of a new product by Oakmont, Pa.-based Touchtown Inc. called Touchtown TV+. The device will allow two-way communication through what DenBraber describes as a self-healing, “mesh network.”

Another now-completed demonstration project, in cooperation with the University of Miami, recruited 12 residents for 12 weeks to use “Dance Revolution” equipment in its Wellness Center to see if residents could gain greater bone densities and other positive health effects. A scientific paper on the results is in the works.

Seventeen-acre Holly Creek is one of five Denver-area facilities operated by Christian Living Communities, arranged in a “socioeconomic continuum,” with the more modest five-acre Clermont Park at the other end of the spectrum.

Experiments such as Touchtown TV+ can be beta-tested at Holly Creek. With that credential, they then become more affordable for all the company’s complexes, including Clermont Park, DenBraber says.

“We’re always looking to the next thing that we think can support our residents, whether it’s in memory support or by hosting elder hostels here,” says Holly Creek executive director Cindy R. Hogan.

Wind Crest also features “apartment-style living” in apartments with 40 styles and sizes between 700 square feet and 2,023 square feet. The plan ultimately calls for five buildings, four different-sized residential buildings containing almost 580 apartments connected by climate-controlled walkways to a 52,000-square-foot clubhouse. Upfront prices range from $143,000 to more than $500,000. The deposit is fully refundable. Monthly costs range from more than $1,500 up to about $2,100.

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Wind Crest senior development

Two years old, Wind Crest in fall 2008 opened its fourth building. “Things have been moving very quickly. We are just over 83 percent occupied,” says Jason Atwell, sales and marketing director for Wind Crest. “As far as (residential) volume, we have surpassed our opening in other states.

“We’re very fast-growing. One reason is our location,” says Atwell, which seems to indicate that sometimes, even in the toughest times, truisms remain true.
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