Another example of wealth in action

https://www.wsj.com/articles/new-senior-housing-projects-charge-big-bucks-for-luxury-living-11647958460

New Senior-Housing Projects Charge Big Bucks for Luxury Living

Developers bet that aging baby boomers will pay rents of over $25,000 for housing with all the extras

A rendering of the Coterie Cathedral Hill development in San Francisco.PHOTO: RELATED AND ATRIA SENIOR LIVING

By Peter Grant, Updated March 22, 2022 3:05 pm ET

Developers are making bets that as baby boomers age demand will soar for ultraluxury senior-housing projects with rents that can exceed $25,000 a month.

A venture of developer Related Cos. and Atria Senior Living, one of the largest U.S. senior-housing operators, earlier this month opened the first of its Coterie line of senior-housing projects in San Francisco’s Cathedral Hill neighborhood. Amenities at the 208-unit project include five dining options, a rooftop terrace, an outdoor pool and a garden with bocce ball courts.

Monthly rents range between $8,000 and over $25,000 a month including meals, housekeeping, concierge services and cultural programming. Like many of the new luxury senior-housing projects, Coterie Cathedral Hill can support seniors whose needs range from no special care to assisted living and memory care.

Other developers that have targeted the luxury senior-housing niche include private-equity firm Kayne Anderson Real Estate, which has opened 13 properties with about 2,800 units and has one in development, a repurposed 1855 Greek revival structure in New Orleans. Average units in the firm’s Brooklyn project rent for $13,000 a month and include meals and housekeeping.

Developers are focusing on upscale senior-housing development because some baby boomers—people who were born between 1946 and 1964—are approaching the age that people typically enter senior housing, according to senior-housing industry participants.

“Between 2005 and 2018, the over-80 population grew by 200,000 or less per year,” said John Moore, Atria chief executive. “Last year it grew by 325,000. This year, probably 450,000. Next year over 600,000.”

Most private senior-housing operators target the middle market and charge average rents of about $5,500 a month for assisted living including food, housekeeping and activities. In recent years, developers and operators have started to focus on more upscale niches similar to the way lodging companies have created new upscale brands.

“You’re starting to see segmentation in the industry,” said Beth Mace, chief economist for the National Investment Center for Seniors Housing & Care, an industry organization.

A rendering of a residence at Coterie Cathedral Hill.PHOTO: RELATED AND ATRIA SENIOR LIVING

One of the pioneers of the luxury end of the business was Vi Living, a company controlled by Chicago’s Pritzker family, which also is a major shareholder of Hyatt Hotels Corp. , according to Randy Richardson, Vi’s president. Founded in 1987, Vi Living is planning to launch a new rental brand with a 320-unit development in Scottsdale, Ariz., Mr. Richardson said.

Groundbreaking is expected early next year, Mr. Richardson said. “Over the next five to six years, we could have 10 of these communities open or under development,” he said.

Senior housing was one of the hardest hit commercial property types by the pandemic. Many people didn’t want to move into facilities because they feared infection and being cut off from their families by health protocols.

Conditions have steadily improved since vaccinations became widespread. The average senior-housing occupancy rate in the 31 primary markets was 81% in the fourth quarter of 2021, up from a pandemic low of 78.7%, but still off the pre-pandemic rate of 87.6% in the fourth quarter of 2019, Ms. Mace said.

Many of the new luxury senior developments are in downtowns, which have added to their rents because land prices and construction expenses are high. The Related-Atria venture is also planning to open a 120-unit facility under the Coterie brand later this year in Related’s sprawling Hudson Yards development on Manhattan’s west side.

“Seniors who are urbanites want to remain urbanites,” said Mr. Moore of Atria.

Write to Peter Grant at peter.grant@wsj.com

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