Developers Reinvent Adaptive Reuse

by Jeff Shaw

Creative projects tackle many of the biggest trends in seniors housing, such as multigenerational living, affordability, downtown locations and walkable neighborhood amenities.

By Jeff Shaw

Adaptive reuse projects are a tricky proposition for seniors housing developments, with a long list of both pros and cons. 

On the positive side, a historic building that is valued in the community may find new life. Historic tax credits become available to help a project pencil out and increasing construction materials costs are mitigated by reusing an existing structure. Additionally, by reusing an existing building a developer doesn’t need to hunt down acreage in built-out markets.

The negatives? Retrofitting an old building can be difficult and expensive. Modern building codes must be met, and the modern needs of seniors have changed over time as well. Turning a hotel room into a seniors housing unit, for example, might require changing door and hallway widths. In other words, the existing structure might not lend itself quite as easily to a transformation as it may seem.

Repurposing a building can often turn out to be more expensive than demolishing and building anew, which is why adaptive reuse projects are relatively rare for seniors housing, notes Todd Hudgins, senior vice president of senior living for ERDMAN, a developer that has executed adaptive reuse projects.

“Most of the opportunities we looked at would not work as an adaptive reuse project,” he says. “The most obvious trend has been in hotel dispositions due to pandemic pressures. But that doesn’t exactly mean home run time for seniors housing. It still must pencil out.

“However, if the market demographics are supportive and the building can meet the codes and the basic required functionality without completely tearing it down, then the cost basis can be attractive to making the deal work.”

When done well, adaptive reuse seniors housing projects can tap into a variety of the hottest trends in the industry while creating a beautiful building for less money than ground-up development. Today’s trends include affordability, walkability, downtown living, use of nearby community amenities and multigenerational integration. What follows are four case studies that showcases the art of adaptive reuse.

Case Study #1:
Surrounded by Retail 

When it comes to bringing outside amenities to its residents, Varenita of Simi Valley may take the cake. The community is built into the corner lot of an open-air shopping center in Simi Valley, California, approximately 40 miles northwest of Los Angeles. 

Without so much as leaving the parking lot, residents have access to a CVS pharmacy, medical offices, a nail salon, cigar shop, shoe repair and restaurants ranging from fast food to steak and sushi. The location is also just off an exit from Ronald Reagan Freeway, the main highway connecting Simi Valley to surrounding cities.

“The location of Varenita gives residents the opportunity to maintain independence even when they can’t drive,” says Paul Griffin, president and CEO of Griffin Living, the developer. “It also provides convenient options for visiting family members — residents and their families can run errands or go out to eat together. Even residents who don’t want to go out much find that having activity and people around them is invigorating.”

The recently opened community features 75 assisted living units and 27 memory care units in a 97,000-square-foot space. Amenities within Varenita include dining rooms, family lounges, a fitness center, beauty salon, library, game room, TV room and bistro.

When it came to selecting the property, Griffin Living had a leg up — it owns the shopping center.

“We had to do construction in a way that was respectful to existing tenants, especially since we have longstanding relationships with many of those tenants,” says Griffin. “We needed to be careful about not making too much noise during business hours or interfering with parking.”

The community is “leasing up at a rate that is ahead of pro forma,” according to Griffin, and residents are younger than expected. The property is a compelling example of how developers can find favorable locations by thinking beyond buying land and building from the ground up, notes Griffin.

“Our project shows how location is a major factor in the success of these conversions. Families want their loved ones to be close by, so communities often do best close to major metropolitan areas. 

“In terms of existing amenities, buildings with commercial kitchens are a bonus, as are buildings with plumbing for individual units. However, with the exploding demand for senior living, many types of buildings will be used for these kinds of conversions regardless of existing infrastructure.”

Case Study #2:
Auburn Affordability

In the small town of Auburn, Massachusetts, a suburb of Worcester, Pennrose partnered with the town government to repurpose two former schools into seniors housing. 

Not only did the projects keep the Mary D. Stone and Julia Bancroft schools from demolition (both schools are over 100 years old), but the projects offer affordability and multigenerational aspects.

The $21.5 million Mary D. Stone project is located adjacent to Auburn Town Hall, and both the town and Pennrose took advantage of that fact. 

The school’s playground was given back to the city, with brand-new equipment financed through a contribution by Pennrose. This brings children onto the property, adding a multigenerational element to the project, and serves as a bridge between Town Hall and the apartments.

“There are going to be soccer teams playing outside,” says Charlie Adams, regional vice president, New England, at Pennrose. “There will be benches and sitting areas where people can sit and watch and get some interaction between families and our residents.”

The community room at the renovated school also serves as overflow event space for town events, inviting the larger community into the former school. Additionally, an ADA-compliant ramp was added to connect Mary D. Stone School and town hall, giving residents easy access to events and town meetings.

“The role the town plays in these projects is really significant,” says Adams. “They took the initiative. They wanted something to happen with these buildings. They really embraced the concepts and helped us get through zoning and approvals.”

The Mary Stone project included some demolition to newer expansions at the property, plus a four-story new-construction element expanding on the existing two-story school. It totals 55 units with a mix of affordable and market-rate units, all age-restricted.

“We want communities where everyone can live there, not simply 100 percent affordable,” says Adams. “We like to have a mix of income requirements. We want a diversity of unit types.”

The $24.6 million Bancroft project is remarkably similar. It also features a playground financed by a contribution from Pennrose, a mix of historic structure and new-build expansion, and a mix of income requirements. The development totals 60 units.

“Doing both buildings at the same time helped with economies of scale, as we manage all our own development,” says Adams.

Pennrose was able to get the projects to pencil out through a variety of methods: cooperation from the town government, historic tax credits and low-income housing tax credits (LIHTC) via the Massachusetts Historic Commission and Department of Housing and Community Development.

Case Study #3:
Richmond Rejuvenation

Fay Towers, an 11-story, 200-unit public housing community for seniors built in 1976 in Richmond, Va., had become a problem. Local news station WWBT described “filth and disarray,” as the city worked to find new homes for the community’s residents before demolishing the building.

The new homes were found via three adaptive reuse projects at three separate historic sites within the city: 

• Baker School, the first elementary school in the city for African-Americans when it was built in 1939, was converted into 50 units for seniors at a development cost of $15.8 million.

• Highland Park School, a high school originally constructed in 1909, was converted into 77 apartments and opened in 2015 at a development cost of $11.8 million.

• Van De Vyver is currently under construction in the historic Jackson Ward neighborhood. Although primarily new construction, the project also included the adaptive reuse of a historic convent into eight of the multifamily units. The project also preserved a garden established by the Catholic Diocese to commemorate the former site of St. Joseph’s Catholic Church, believed to be the first Catholic congregation for African-Americans in the South. The complex features a mix of units for families and seniors, as well as 6,000 square feet of retail space. Development costs for the full project were $30 million.

Enterprise Community Development led all three projects as part of a public-private partnership with the City of Richmond.

“Public housing has been stigmatized in Richmond, and Jackson Ward is a gentrifying historic neighborhood with a substantial base of African-American homeownership. It has also seen a recent uptick in affordable development,” says Rob Fossi, senior vice president, real estate development for Enterprise Community Development. “HJWA [Historic Jackson Ward Association] was clear in not wanting yet another affordable housing project, which made us think more creatively in leveraging its strong community ties to secure community approval for 72 replacement public housing units.”

When looking at an adaptive reuse project, Enterprise seeks a building that can deliver 50 to 150 units. Historic tax credits and LIHTC are crucial. The public-private partnerships are what allowed these specific projects to pencil out, notes Fossi.

“When sites are controlled by mission-directed, faith-based institutions; public sector agencies; or longstanding community-based institutions such as ‘eds and meds’ [schools and health systems], the opportunity for nonprofit and mission-directed developers such as Enterprise to partner in the delivery of affordable senior housing can be especially impactful. 

“These and other socially motivated owners are often willing to contribute property below market value to assist with feasibility. The combination of a reasonable acquisition price and more modest construction costs compared with building new can make all the difference.”

Case Study #4:
New Starts in New England

Another big believer in adaptive reuse projects for mixed-income seniors is Winn
Development. The developer has three projects in New England underway: The Tyler, a $21.5 million school redevelopment in East Haven, Conn.; The Wells School, a $25.7 million school redevelopment in Southbridge, Mass.; and Manomet Place, a $19.2 million factory redevelopment in New Bedford, Mass.

“For The Tyler we received local and state historic credits. They effectively slice away at some of the budget to make the effective net cost a much lower number so you can rent that at affordable levels,” says Larry Curtis, president and managing partner of WinnDevelopment.

“You create this fabulous housing, centrally located, that’s part of the collective memory of the community. It’s not some nothing building; it’s the old high school. It becomes a magnet for people to live. These developments often have enormous waiting lists and are highly attractive to people in the community.”

Schools and old factories have more in common than one may think for these sorts of projects, he adds. They have high ceilings, wide hallways, ancillary spaces that can serve as common areas and plenty of windows.

“Manomet is very wide, so we have a lot of square footage, thus a lot of our apartments are one bedroom plus a den or working area,” says Curtis. “It’s a beautiful building with over 2 million bricks and hundred-year-old wood beams.” 

“These old factories, they’re magnificent structures,” he continues. “This is from when New Bedford was the center of the manufacturing world. When the mill owners built their factories, it was a chance to showcase themselves. It wasn’t a slapped-together factory. They were built to last, and they did last. The project is already fully leased with a long waiting list.”

All three projects feature a mix of incomes — some are reserved for those making over 60 percent of area median income (AMI), some for those making under 60 percent AMI and some for those earning below 30 percent AMI.

“We’re a big believer in workforce housing,” says Curtis. “Many communities need housing for the firefighter, the people who earn $60,000 to $100,000 per year, because the math to afford rent doesn’t work for those people either. Developers are largely not building to that clientele, or not at a location where the people wish to live.”

While a huge proponent of adaptive reuse seniors housing projects, as well as affordable seniors housing, Curtis candidly admits that these projects are not for the faint of heart.

“They’re complicated to do. There are multiple funding participants, plus state, local and federal involvement,” says Curtis. “Location is important. The sites that are often presented in the community are the leftover sites that no one wants. Who wants to live next to the junk yard?

“The demand for affordable housing, particularly for seniors, has never been greater,” he adds. “When we make these properties available for occupancy, we have 1,000 people showing up to rent.”

Hudgins of ERDMAN says that truly creating long-term affordability for seniors is going to take more than tax credits, old buildings and hard work.

“The affordable and middle-market need is significant; if we rely on costs and profits alone to solve that need, I believe we’ll fail. Cost is certainly a big piece, but I think there are a few other categories that need to reinvent themselves as well. Operational models will have to pivot slightly. The financing model for these projects will need to look a little different from the traditional model. Lastly, state regulations could have a role to play in making it possible for operators to deliver care more affordably.”

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