Adult day care centers, hotel conversions offer alternative to traditional housing
By Brian Robinson
As they reach their golden years, retirees find their housing and health needs changing. In the coming decades, many Baby Boomers will require long-term care.
Hotel conversions and adult day care centers are positioning themselves to meet these demands.
Hotels are ideal for conversion into assisted living communities, because they’re already equipped with many necessities, including individual units with private bathrooms, common areas and landscaped grounds. And more senior apartments are needed, as there will be 88.5 million Baby Boomers over age 65 by 2050 — double the number in 2010.
Hotel conversions first gained traction when a downturn in the U.S. economy coincided with an upturn in the number of available hotel properties. Specifically, a decline in tourism resulted in vacant hotels, and developers snapped up the properties, often at below-market prices.
For example, the 113-room Alta Vista Hotel (once a Hilton Garden Inn) near Birmingham, Ala., sold for $600,000 in receivership. It is currently being converted to an assisted living facility.
Inexpensive alternative to new development
A new 100-unit assisted living facility costs $10 million to $12 million to build, according to April 2013 data from real estate development news outlet High-Profile. But the Alta Vista Hotel conversion will cost only $4.5 million.
Jumer’s Castle Lodge hotel in Peoria, Ill., was converted into independent and assisted living at a cost of $6.5 million, including a wine garden, beauty shop and spa.
The Hotel Bollero in Palatine, Ill., is being repurposed for $8 million to $10 million and will have shops and a movie theater.
As developers turn hotel properties into assisted living facilities, they may save money on construction costs, depending on hotel condition and preferred amenities. Either way, conversions help to meet the increased need for assisted living facilities.
With the assisted living occupancy rate already at 89.3 percent, according to National Investment Center (NIC) MAP data, Baby Boomers who reach their mid-70s may face a housing crunch.
Conversion requirements and challenges
While hotels can be natural fits for conversion to assisted living, there are unique challenges.
Bathrooms, hallways and doorways must be widened to fit scooters and wheelchairs. Architects may suggest creating one senior apartment for every two converted hotel rooms to achieve preferred unit sizes.
Since dining rooms often double as social meeting areas in assisted living, they must be comfortable and spacious. Full-service kitchens are needed because meal plans are included.
Assisted living facilities must comply with fire safety laws and building codes. Additional ramps and elevators may be necessary to meet state regulations for seniors housing.
Successful conversions from hotels to assisted living require that developers manage design, construction, zoning, permits and unexpected discoveries such as asbestos or damaged plumbing.
Expect a rise in adult day care
The often-high rents of assisted living facilities may not be affordable for some seniors. The Genworth 2015 Cost of Care Survey quotes $3,600 per month as the national median for a one-bedroom assisted living apartment.
Personal care assistance (bathing, dressing, grooming), amenities (dining, transportation) and low-level healthcare (medication management) costs are rolled into the monthly rent.
In contrast, the national median daily rate for adult day care is $69 per day, or $1,500 per month, according to the Genworth survey — a 6 percent increase from 2014. The type of adult day care and geographic location drive the actual rate.
Adult day care allows seniors to postpone moving into assisted living, and helps keep their long-term costs low. This is important, because the Employee Benefit Research Institute says 74 percent of Americans ages 55 to 64 have retirement accounts, but with a median balance of only $104,000.
Day care offers a happy medium
Whether seniors seek care or companionship, they can likely find it in a day program.
The centers operate on weekdays during normal business hours. Seniors dine on nutritious meals, and receive assistance with activities of daily living. They can be picked up and dropped off at their homes, easing caregiver concerns about transportation.
Caregivers — often spouses or adult children — can work full-time with the peace of mind that their relative is well cared for. Whatever the need, there is likely a day program to address it.
Adult specialized day care targets seniors with developmental disabilities or dementia. Adult health day care focuses on medication management, physical therapy, respite and counseling. Some adult day care facilities function as rehabilitation centers for those newly released from the hospital.
Adult social day care provides recreation, exercise, basic health services and social activities. And it’s more than just bingo and card games. There are book discussion groups, field trips, music therapy, gardening and pet therapy.
Staffing generally consists of a nursing professional, social worker and/or case management worker. There are often activity directors and support programs for caregivers. Many adult day care centers are connected to assisted living facilities, hospitals and nursing homes. But the majority — 70 percent — are freestanding, generally housed at a local church, school or community center.
The number of adult day care centers is growing rapidly
The National Adult Day Services Association (NADSA) counted 5,700 programs operating in the U.S. in 2014 — a 20 percent increase from 2010.
The mean attendance is 39 participants per center. That is a manageable size for seniors who seek a small, personal group before finally moving into an assisted living facility.
As the Baby Boom generation continues to age, adult day care centers and hotel conversions could be vital to meeting the healthcare and housing needs of this demographic.
Brian Robinson is a senior vice president of the commercial banking — healthcare department at MB Financial Bank. He is responsible for maintaining the existing portfolio and originating business in the healthcare space.