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Location, Location, Location — Strategic Real Estate Considerations For Senior Living


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A senior living community’s ability to maximize the
effective use of its real estate assets often plays a key role in
the success of the community and the happiness of residents and
staff. This is especially true for continuing care retirement
communities (CCRCs), whose campuses typically include many
different types of residences, dining venues, recreational
facilities, specialty healthcare services and other amenities for
residents and staff.

The initial development of CCRCs and other senior living
facilities is laden with complexities, but the importance of
thoughtful real estate design does not end when the doors of a
facility open. Instead, devoting continued attention to real estate
strategy can help senior living communities prepare to tackle
future issues and achieve many short-term and long-term
objectives.

Below are examples of ways the strategic acquisition and
development of real property can impact senior living
communities.

Addressing Changing Resident Preferences. The
desires of senior living residents are changing rapidly as the baby
boomer population enters senior living communities. Similarly, the
long-term care needs of seniors are evolving as life expectancies
continue to increase. For senior living communities, the ongoing
shift in residents’ wants and needs has created a demand for
additional real estate that can be used to address the requirements
of existing and future residents. In addition to simply expanding
the size of a community’s campus and increasing the number of
residential units, new real estate assets can be used to:

  • Develop healthcare facilities designed to address emerging
    resident care needs, perhaps including specialty memory care
    facilities, and additional assisted living and skilled nursing
    facilities.
  • Construct additional recreational facilities and requested
    amenities, such as pickleball courts, spas or massage therapy
    centers.
  • Develop multipurpose facilities serving on-campus and
    off-campus customers (e.g., retail businesses catering to a senior
    community’s residents and the local community at large).

Independent Living – Single-Family Homes.
In addition to facing new healthcare needs and shifting amenity
preferences, senior living communities recently have experienced an
increased demand for accommodations styled as single-family homes
(see further discussion in McGuireWoods’ Aug. 30, 2023, legal
alert, “Real Estate Trends in the Senior Housing
Sector
“). Some CCRCs and firm clients have successfully
addressed this increased demand by acquiring existing single-family
homes near their community’s campus and converting the homes to
residential units for residents. This approach allows the CCRCs to
meet the desires of residents seeking stand-alone housing (as
opposed to apartment-style accommodations), while simultaneously
increasing real estate holdings and revenues, as the larger
accommodations often are coupled with increased entry fees and/or
monthly dues. Note that the acquisition and conversion of existing
homes in this manner requires a careful evaluation of public and
private restrictions and requirements, such as zoning ordinances,
private real estate restrictions and existing financing covenants
and requirements. That analysis should be performed early in the
process of deploying this strategy, and McGuireWoods has assisted
clients in navigating these hurdles.

Acquisition on Adjacent Property. Senior living
communities can achieve several strategic objectives by acquiring
additional real estate adjacent to the boundaries of their existing
campuses. Perhaps most importantly, the acquisition of additional
land helps provide certainty for a community and protection against
future issues by creating a buffer between the existing campus and
future, adjacent development that may be incompatible with senior
living facilities. Acquisition of undeveloped real estate also
increases green space within communities and can help create a more
private and peaceful experience for residents and staff. In
addition, the acquisition of land assets generates operational
flexibility for communities as the needs and desires of residents
evolve, since land can be developed for future projects. Firm
clients have experienced short-term and long-term benefits from
this strategy on multiple occasions.

Non-Adjacent Properties. Although the previous
section considers the acquisition of land adjacent to existing
communities, senior living communities certainly can benefit from
the acquisition of real estate that is not adjacent to their
existing campuses. For example, acquiring additional real property
across town can provide a single-site facility that has outgrown
its campus with opportunities to continue developing new facilities
for residents and staff, and to partner with local organizations to
develop community centers and other multipurpose facilities.
Similar to the section above, the acquisition of non-adjacent
properties also increases operational flexibility.

Employee Housing. In addition to the benefits
described above, the acquisition of existing single-family homes
and other residential properties enables senior living communities
to cater to their employees through employee housing. Senior living
communities, like businesses across numerous industries, continue
to encounter challenges in the labor market, and the ability to
offer quality employee housing can be a significant advantage for a
community seeking to differentiate itself in a competitive labor
environment.

Timing and Construction. Timing is everything,
particularly for real estate development. It often takes several
years to navigate a new project through the processes of designing
plans, obtaining relevant entitlements and approvals, securing
financing and completing construction, so senior living
organizations need to plan ahead and consider future real estate
needs as part of their strategic planning processes. In addition to
the actual timeline from initial conception of a real estate
project to the completion of construction, senior living
communities should be mindful of the scheduling of construction
work, which can interfere with the day-to-day activities of
residents and staff and may require the closure of dining and
recreational facilities. Also, for communities that have
experienced continued or significant growth, the correct phasing of
construction activities can help prevent construction fatigue among
residents and staff.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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