Retiring at the Ritz-A Guest Post from Llenrock Group
May 21, 2014
This post from Eric Hawthorn is part of our Llenrock Group guest post series and originally appeared on the Llenrock Group blog.
There is a great deal of overlap among CRE asset classes, which I think is what makes each so interesting. Medical office buildings, for instance, are office assets modified for use by (duh) the medical profession, which makes them something of a hybrid of office and healthcare properties. And when it comes to operations and design, hospitality concepts have found their way into asset classes well beyond hotels and restaurants, influencing retail and multifamily projects that have a “lifestyle” or luxury bent. Similarly, single-family rentals are now operated and invested in more like multifamily assets. Real estate specialties seem to evolve through the influence of other CRE sectors.
We particularly see this (buzzword alert!) “synergy” in effect when it comes to repurposed real estate, when one asset class is quite literally adapted to work in a different sector. In many major and older cities, one salient example of this process can be seen in the trend in which increasingly obsolete office assets are converted to luxury apartments, or industrial properties converted to “loft-style” apartments (aging industrial buildings are also serving as self-storage facilities in some cases, I’ve noticed). There are a lot of things one can do with a basic several-story structure.
Which brings us to today’s topic: the trend in which obsolete or superfluous hotel properties are being converted to senior housing. As Baby Boomers reach retirement age, investors and developers have shown greater interest in senior living projects of all kinds (independent living, assisted living, skilled nursing, memory care, etc.), and this interest has led to a number of interesting hotel-to-senior living conversions, including those below:
- F&F Realty is repurposing the Palatine, Illinois Hotel Bollero into a 118-unit independent living community, Senior Housing News reports
- In Austin, Texas, Senior Housing News also reports, Pi Architects has emerged as a firm that specializes in senior living properties, and one of its projects has been the conversion of a hotel and convention space in Dallas into a multi-specialty senior living community called Windsor Senior Living
- Other examples include a former Sheraton Hotel being converted to senior living in Fort Myers, FL by The Pittman Group
- In the Sacramento, California area, the Rocklin Park Hotel is being converted to Rocklin Park Senior Living, it was announced at the end of last year
Developers are sometimes attracted to hotel-to-senior-living conversions for the same reasons they are attracted to office-to-apartment conversions: the multistory assets are comparable in size, already divided into individual suites, often come with sufficient parking, and exist in established communities that can support such a conversion. And for senior living and multifamily alike, the demand is real; few communities offer as much demand for aging office or hotel assets.
Of course, despite all the market fundamentals justifying a conversion to senior living, an experienced developer may see reasons not to execute such a repurposing project, as Senior Housing News explains:
As senior housing development continues to take cues from the hospitality industry, conversion projects that transform defunct hotels into senior living communities might be more trouble than they’re worth, though it largely depends on the property type.
Resident acuity levels and complying with varying states’ building code requirements makes hotel conversions more feasible projects for independent living transformation, rather than assisted living…
And independent living is just one niche within the larger senior living real estate sector. Codes for senior housing vary by state, of course, so conversions may be viable in some states more than others. As is often the case, ground-up construction may make more sense than repurposing, but that all depends on where the project is taking place, what type of asset the developer is working with (and what condition it’s in), and the ultimate function of the senior housing asset once completed.
Author: Raymond T. Cirz