Architects and developers are finding ways to get creative with the practice of adaptive reuse, where old buildings are converted into new senior housing offerings.
While this practice is not for the faint of heart due to the costs and challenges of bringing buildings up to code, it comes with unique marketing opportunities and opportunities once projects are completed.
Among those working in this area of development are Maplewood Senior Living, Felician Services and Senior Lifestyle. Recent projects include Maplewood’s Inspir Embassy Row, built from a former hotel in Washington, D.C.; the conversion of a convent in Livonia, Michigan, into affordable housing for seniors; and the conversion of a century-old monastery in northwest Chicago into Norwood Park senior suites.
According to James Adams, senior vice president of real estate development and acquisitions at Maplewood Senior Living, about a quarter of all new development acquisitions in New York came from the redevelopment or repurposing of office or residential properties.
“Building from scratch is simple,” said Chet Jackson, managing director of real estate ministry development at Felician Services. “But when you have adaptive reuse, you have to use what’s there and figure out how to incorporate what’s current into that project.”
With demand for senior housing growing over the next decade in the form of baby boomers, adaptive reuse could help senior living companies continue their growth as loans and labor for new developments remain difficult to obtain.
“It’s one of the levers we have as developers to bring supply to market,” Adams said.
All available levers will likely be needed in the coming years as well, as the industry will need to find a way to grow communities to 3.5 times the current rate in order to meet the number of seniors entering the industry by 2030.
Unique challenges, unique opportunities
It’s no secret that designing senior living with adaptive reuse in mind comes with its share of challenges. One of the main reasons is that architects and developers must fit into a pre-built envelope, with corridors, rooms and other spaces that may not be suitable for senior living.
Office buildings in particular have difficulty providing enough light and ventilation, as well as having the density needed to convert them into apartments, according to Bob Gawronski, vice president of development for Chicago-based Senior Lifestyle, in Illinois. Hotels are also difficult to convert as rooms are not always tailored to what older people want.
“You have to be prepared for a pretty heavy contingency relative to the base,” Gawronski said.
Felician Services is grappling with renovating a space with concrete floors and walls as part of its Michigan convent renovation project. In order to wire HVAC and electrical, split systems must be incorporated into the structure, according to Jackson.
However, these types of projects can also lend themselves to the redesign of existing structures, such as shelves integrated into living quarters in the case of the convent.
“We have great finishes, and so that’s part of the marketing of the unit itself,” Jackson said.
Determining the number of units in a building as a starting point varies by developer. Maplewood focused on large conversions ranging from 174 to 215 units, all with a hefty price tag of nearly $1.2 million per unit. But the operator will scale back its future plans in terms of the number of units, Adams said. Felician Services focuses on smaller buildings ranging from 60 to 80 units, Jackson said.
If an adaptive reuse project is too large, it becomes difficult to sell it on time, Gawronski said.
“Anything larger than (200 units) … the length of the lease and the length of the lease really takes its toll,” Gawronski said. “In the long run, for anything bigger than that, you’re on a treadmill of trying to fill the apartments as they turn over.”
Despite these kinds of challenges, converted buildings offer their share of unique opportunities, particularly from a marketing perspective. Inspir Embassy Row converted the Fairfax at Embassy Row, an old grand dame hotel with “ornate cornices, beautiful masonry work and things no one would justify building today,” into the senior living community that she is today. It can help add a unique, hard-to-recreate quality to a community, Adams said. And grander, older features such as those included in the hotel may strike familiar chords for some residents.
“(Asking residents) to spend the rest of their days in a new environment, the idea of giving them something familiar is a pretty extraordinary value proposition,” he said.
Adaptive reuse: “wacky… but worth it”
Converting older, non-residential buildings into senior housing can be an expensive and delicate process, but not necessarily more expensive than building from scratch, depending on the details. To maximize returns, some companies seek state tax credits.
Senior Lifestyle opted for a tax package covering $1.6 million for preservation through the National Park Service for its Senior Suites of Norwood Park project, Gawronski said.
While there are ways to complete adaptive reuse projects within budget, they have even more hurdles to overcome. Senior Lifestyle worked with the Illinois State Historic Preservation Office, which prioritized preserving the building’s cornices and fenestration, which “doesn’t make much sense to a layperson” , Gawronski said.
“There are some crazy little things like that, but it’s definitely worth it,” he said. The actual cost of the monastery was probably close to a million dollars…but we qualified for the $1.6 million in tax credits and capitalized it into $1.5 million. It was a win-win for everyone,” he said.
For operators wanting to get more involved in developing adaptive reuse, Jackson recommended choosing contractors based on their experience on projects using tax credits, as well as finding those who have worked on types of similar projects. The operator’s Michigan project went more smoothly because the company’s chosen contractor had completed “a lot of adaptive reuse,” including a hospital and another senior living facility.
Adams said when Maplewood is looking for contractors, it’s critical to focus on the physical environment for reuse, especially when it comes to finding the right architects.
“Many large contractors have a lot of experience with historic renovations, but this is a critical aspect of project success,” he said.