As the wave of baby boomers approaches the senior living industry, companies playing in the active adult sector are honing their strategies to attract them.
Two big trends have emerged in the sector: communities tailored to middle-income residents, with more affordable rates and services; and active adult communities that serve as a platform for health care.
With fewer of the bells and whistles and a scaled-down slate of services compared with their traditional senior housing counterparts, some companies look to active adult communities to execute on their middle-market strategies.
At the same time, the younger resident makeup of active adult makes the product type well-positioned for preventive wellness and health care.
One company targeting middle-income senior living residents is Essex Communities. Essex owns and operates a portfolio of 10 “independent living light” communities marketed as “active 55-plus living” in Colorado, Kansas, Illinois, Iowa, and Nebraska; with four additional communities in the pipeline, including the company’s first in South Dakota.
Welltower (NYSE: WELL) partner Clover is targeting a similar resident base with its independent living communities. The company has a portfolio and pipeline totaling more than 50 communities spread across Indiana, Kentucky, Missouri, New York, Ohio, and Pennsylvania.
On the health care side, senior living and health care developer Avenue Development recently launched a new active adult company that will provide preventive care and other health care services to residents at the community level. Clover is also playing in the health care space by working with health system Geisinger.
Pivoting to a younger, more active prospective resident makes sense, given that the boomers are arriving into the industry “healthier and more technologically advanced,” said Clover Group Founder and President Michael Joseph.
Popularity necessitates differentiation
Active adult communities have seen a surge of interest from operators, developers and investors since the pandemic began in 2020. With a more active resident population, fewer pandemic restrictions and far less staffing needs, the product type has proven resilient over the last two years and change.
Toledo, Ohio-based investment bank Welltower has been a driving force behind some of the sector’s recent growth. The Toledo, Ohio-based real estate investment trust (REIT) last year announced plans to scale up with active adult developers Treplus Communities and Sparrow Partners. The REIT has also made its own forays into the space in the past.
Some other real estate companies are taking advantage of the active adult momentum. For instance, Minto Communities is expanding its Latitude Margaritaville brand into three markets in Texas after seeing a surge of demand.
But growing interest in the active adult sector could spell near-term trouble for developers or operators already in the space, according to Frankie Pane, president and COO of Essex Communities.
Though Essex is building communities that could fit the definition of active adult, he is actually “bearish” on the sector in general.
“It’s not a product I would be building unless it’s extremely well-located,” Pane told Senior Housing News.
If current trends continue and the sector stays hot for new construction, Pane worries that could lead to “negative consequences” in the form of overbuilding.
Broader headwinds, such as a recession, could hurt the product type, given that it is more of a lifestyle-oriented product than a needs-based one, Pane added.
“My bearish thoughts on the short-term relate to too much construction too quickly,” he said. “I think in the long run, as developers are prudent and appropriate with the decisions to build, then it can be a successful product.”
Given that interest, some companies including Essex, Clover and Avenue are staking their futures on differentiating themselves from the rest of the pack.
Meeting the middle market
One popular niche for active adult companies is the middle market. While achieving middle-market rates is not always feasible for senior living operators given the care-intensive nature of the business, it is easier to do with a lower-acuity resident base like the one currently found in active adult.
Reaching middle-income older adults with an active adult product is something some sizable real estate companies are exploring. For example, Greystar – the largest operator of multifamily units in the U.S, – is growing a portfolio of middle-market active adult communities under the Album brand name.
Omaha, Nebraska-based Essex pivoted from an entrance fee model to a middle-market rental model in late 2020. The company’s model is based on scaling down certain services and building cost savings into development and construction.
Essex will open doors at two new middle-market communities in 2023, with three additional communities in the pipeline, representing the firm’s first step into South Dakota and Texas, according to Pane.
The Essex Strategy can be summarized as “independent living light.” – “Or, independent living unbundled,” Pane said.
For example, in an Essex community, residents can partake in a continental breakfast, but evening meals are optional.
“Most people want the ability to cook [for] themselves or to dine in their favorite restaurants,” said Pane. “But they also want the peace of mind of knowing that if they just want to stay and have somebody else prepare the meal, they have the option.”
By scaling back offerings typically available in an independent living community, Essex can lower rates for residents without diminishing the overall value proposition.
Additionally, staffing communities more efficiently can go a long way, according to Pane.
“I think some [IL communities] have gotten to the point of over-employing staff and providing too many services that they do a disservice to their residents,” he said. “Residents can be empowered to have a greater role in the community, which is a better thing for their wellness.”
Clover is looking to attract a similar resident demographic in its middle-market senior living communities. The Williamsville, New York-based vertically integrated developer and operator manages 41 properties, with 10 more currently under construction and an additional seven expected to break ground later this year.
A typical Clover community has around 125 units, with monthly rates ranging between a little more than $1,000 to about $1,200. Residents don’t receive any meals or care as part of their monthly rates, but internet, heat, electricity, cable TV and water are all included in the base price. The company’s target resident is someone who has deep roots in their community.
“Middle-income seniors are typically staying right where they’ve lived their whole lives,” Said Joseph. “They want to stay in the neighborhood … they want to go to the same grocery store, the same doctor.”
Clover has developed a vertically integrated construction model suitable for middle-income projects in a variety of markets. And looking ahead, Joseph is bullish on the product type.
Access to health care
Some companies are betting that it will not just be middle-market rates that attract future residents, but also access to health care and wellness.
One company slated to grow in that regard is Avenue Development, which is planning to develop 1,500 units of senior housing in the next four years. The company has $450 million in total investment already in the pipeline for its recently announced Viva Bene active adult brand, according to Principal and Co-founder Laurie Schultz.
Viva Bene – “living well” in Italian – is based on four “pillars,”: affordability, technology, wellness programming, and health care partnerships. The company is planning to develop three to four such projects per year.
The majority of Avenue’s future growth will come by way of joint ventures with assisted living, memory care and skilled nursing operators, according to Schultz.
“This is a moment in time where we’re really segmenting what we’re doing,” Schultz told SHN.
The first Viva Bene community is planned for the St. Louis suburb of St. Peters, Missouri, with construction slated to start this summer. Once completed, the community will include 161 apartment units and amenities such as co-working areas and a wellness hub.
Through Viva Bene, Avenue will partner with a to-be-revealed local hospital system and provide care options for residents in the community.
In the future, Avenue plans to seek health care partners that are focused on primary care, and that operate under a value-based health care model.
Avenue plans for Viva Bene residents to age in place as long as they can thanks to health care partnerships.
“Every health care provider we’ve talked to absolutely sees the merit and the dire need … to integrate with senior living,” said Schultz.
Clover shares that philosophy. The company in recent years has worked with Geisinger to integrate the health system’s care programs in certain Clover locations in Pennsylvania, including by giving residents access to specialized clinics providing primary care and other services.
Although Joseph said he favors active adult communities adjacent to a medical office for seniors, he added that it must be done in a way to avoid the community feeling too clinical.
Though their models differ, Both Joseph and Schultz agree that there are big opportunities ahead in helping residents avoid trips to the emergency room.
“The number one important thing is hospital avoidance,” said Schultz. “I don’t think of our business in terms of properties, I think of it in terms of lives impacted.”
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