By James Kraft, Kraft Development
The last time I appeared in this section in 2016, I complained in my article Developers Wasting Good Real Estate With Bad Design that same-old buildings were being replaced by same-old buildings with few new communities which I would be interested in moving into as I get closer to retirement. Now, at 66 years old, I will voice those same complaints.
Considering that I have personally been responsible for the “dirt” sitting under more than 12,000 mostly seniors housing units, I hope my voice is finally listened to by both existing and new customers who will finally agree to pursue different alternatives.
Empty hotels and office buildings await
Repurposing hotels is a big opportunity for seniors housing developers.
The average existing Embassy Suites Hotel, for instance, is nicer than any senior living facility I have ever been in, as they provide open indoor space as well as existing dining, pool and conference space that could be converted into alternative, senior-oriented uses.
I estimate that the Embassy Suites in Parsippany, New Jersey, could be bought for $50 million. With new paint and bathrooms — call it another $20 million — it could result in a 250-unit independent living and assisted living property for a fraction of new construction costs.
Similarly, in Northern New Jersey, the Woodcliff Lake Hilton represents a high-barrier-to-entry redevelopment opportunity, but many have turned it down due to its 8-foot ceilings. How many people object to an 8-foot ceiling, really?
No, hotels may not be as efficient as new construction. But considering the cost savings over ground-up development, it will be worth it.
The same is true for empty but well located office buildings. Look at places like Livingston or Madison, New Jersey, where we fought to get new construction done in very high-barrier-to-entry sites. An office building, especially if built over existing parking garages, is ripe for new senior living. The existing elevators, rooftops, floors, parking lots, landscaping and handicap accessibility considerations are sitting there as costs that won’t have to be replaced.
Is it perfect? It will be if the 150-foot floorplate gets an atrium built inside to bring in air and light to the interior corridor. Again, if you see the common theme of my love for atriums, that observation is correct.
Affordable or expensive? It all depends on the neighborhood and what you can get away with.
In Boca Raton, Florida, there is a former Embassy Suites that could easily be turned into affordable senior living, as-is, this afternoon without any changes except perhaps the bathrooms. It will be a deal-by-deal analysis based on the usual considerations like competition, approvability, timing and, of course, the financial strength of who the owner-operator is going to be.
The regions I am especially focused on are basically between Boston and here in Florida.
Sitting either empty or vastly underused are conference centers and hotels in Connecticut, New York and New Jersey. With the right team, the right financing and the right bit of imagination, these properties could become great places for seniors to live.
And why is seniors housing a particularly strong option? From a land-use approval standpoint, coming in with a property that brings in little traffic and no school kids is usually a plus and leads to quick approvals. If not, courts have generally ruled (with some horrible exceptions) that seniors housing can be considered to be housing for the handicapped (like me, after I get my knees and hips replaced in 20 years and need to get from my car to the unit above).
From what I am busy with today, it really is a stretch between the very-high-end and the not-so-high-end options. I was involved with the roll out of a “Ritz Carlton for seniors” type of development that got scuttled. On the low end, nothing so far — everything has been far from affordable.
If I could wave my magic wand, Gucci would return my calls to brand other developers’ real estate as Gucci Towers, making them more expensive due to the sizzle that a brand name brings to a project. Perfect for Boca Raton but not for Parsippany. So what are we going to call the Embassy Suites redevelopment, Motel 6 Senior Living? Maybe.
And availability of deals? As above, I rattled off 10 existing properties that if redone as seniors housing developments could result in thousands of new units spread between the high end and low end of the spectrum.