September 23, 2019
Connect Healthcare is coming up October 2 and 3, 2019 at The Resort at Pelican Hill in Newport Coast. More information about the event and registration details can be found here.
Curious about Baby Boomers and their changing housing preferences, Connect Healthcare sat down with Passco’s Carey Levy to talk about the company’s efforts to better understand this growing segment of the population, and how the company is capitalizing on opportunities within the seniors housing segment. Read on to learn more about “active seniors” and Passco’s new projects.
CONNECT HEALTHCARE: Passco Companies has more than two decades of experience investing in commercial real estate, specializing in multifamily. What compelled the company to get involved in seniors housing?
LEVY: Passco Companies, over the past two decades, has displayed its ability to evaluate and anticipate market trends and has adjusted our strategy accordingly. Since our founding in 1998, we’ve successfully amassed a multifamily portfolio of more than 22,000 units and through strategic disposition, we currently have approximately 14,000 units throughout the country. Because we engage in thorough acquisition due diligence in each market, we see the market drivers in the U.S. and diversification of asset class, and population trends, and therefore identified the active seniors housing sector to diversify our holdings based on demographic shifts. Our involvement in seniors housing is driven by the growing senior population. A tremendous amount of capital is chasing the “care driven” sectors of IL, AL, MC and SNF, yet most Baby Boomers are just now reaching the first stage of senior living—a stage we call “active seniors.” Therefore, we believe there is an additional opportunity for Passco in the active seniors arena.
CONNECT HEALTHCARE: Tell us more about “active seniors.” What differentiates them from other Baby Boomers?
LEVY: Active seniors (including the Baby Boomers) want to downsize and simplify their lives, yet reside in an invigorating and active lifestyle community of like-kind neighbors. Many seniors are already considering selling their homes or relocating for various reasons, as they find themselves reaching their late 60s, 70s, and early 80s. Through focus groups, we can better interact with a selected group of potential residents in communities we have targeted, and, in a fun, yet more one-on-one setting, learn significant “likes and dislikes” and their motivation for their next living environment.
CONNECT HEALTHCARE: There are studies published on the socialization needs for seniors. Is there data or studies you use to assist you in gaining insight for seniors?
LEVY: There is a study by Kaiser Family Foundation that found social determinants of health or SDOH—transportation, housing, access to food, etc.—are just as important as access to healthcare providers in keeping well. Over 10,000 Baby Boomers have turned 65 every day since January 2011. This segment of the growing senior population is predominantly focused on better living and health choices in nutrition, activities, social interaction, continued education, travel, and wellness. A key ingredient mentioned is “social interaction,” which has been shown to assist an aging individual in maintaining longevity and happiness. We view the Baby Boomers wanting an active living environment to meet all their needs over the next 10 years, before they might require to be in a healthcare facility.
CONNECT HEALTHCARE: What types of “active seniors” investments is Passco pursuing?
LEVY: We’re interested in both new development, existing active seniors projects, and repositioning opportunities. Certainly, there are challenges with new development, such as rising construction costs, land cost, city impact fees and loan parameters, but we believe Passco can manage through those challenges to still keep rents in line within the market each project serves. Acquiring existing seniors assets or repositioning an asset can add to our portfolio, generating a more immediate cash flow which is a nice complement to new development that has no cash flow until it starts lease -up and stabilization. We’ve partnered with Avenida Partners on two prominent developments that are both currently under construction. One is a 161-unit project located outside of Memphis, TN, in Germantown that is approximately 60% complete. The other development, also 161 units, is in Palm Desert, CA, and is 40% complete. Both projects are slated to open in late August 2020.
CONNECT HEALTHCARE: What makes your projects with Avenida unique? Why does Passco think they will appeal to “active seniors”?
LEVY: These developments are resort-style with significant amenities and a concierge style management known as the “Avenida Life,” which promotes an active lifestyle of friendship, fun, camaraderie, and convenience for the residents. The properties are designed with an abundance of amenities such as a large central great room, catering kitchen with demonstration counter, breakfast bistro, yoga/dance studio, fitness & wellness center, movie theater (optional), library, arts room, outdoor pool and spa, fire pit, entertaining area, gardens, and pet park. In addition, there is ample parking for both covered and surface parking. Units of one-bedroom, two-bedroom or two-bedroom plus den are tastefully designed, and include nicely appointed features and materials.
CONNECT HEALTHCARE: What markets is Passco targeting for its seniors housing investments?
LEVY: Although Passco is not geographically constrained, we have identified markets across the U.S. with a growing seniors population where the overall cost of living is reasonable, yet housing prices are escalating. These market conditions seem to work in tandem for a quality seniors rental market. For example, the Palm Desert, CA market incorporates a large area of the Coachella Valley in which there is a high percentage of seniors, both on an annual basis and part-time basis, since it’s a hotbed for Canadians and Easterners to rent and own second homes or apartments for the season from November to May. Over the past five years, there has been a growing number of full-time residents, who predominately come to the Southern California lower desert for the warm, dry weather and active lifestyle. Home prices have risen and the aging population in the Palm Desert area also wants to be free of the on-going cost for maintaining their house, and find a similar surrounding in which they can thrive, without the costly home expense.
CONNECT HEALTHCARE: What is the most exciting thing about entering this new segment of commercial real estate market for Passco? How long did you research this segment before making a move?
LEVY: Passco has considered the seniors sector for the past two years, and participated in various industry events and conferences, research and concentrated studies (and continues to do so). With my return to Passco Companies Development, and my diverse background and experience in the seniors asset class at all levels of acuity, we are comfortable in moving forward with this endeavor. Passco has always looked around the corner to be innovative for the next opportunity, whether that be core versus non-core product, geographical diversity or asset allocation. We are excited about adding this layer of the seniors component to our business plan to expand the company’s ventures and open up new horizons.
For questions, comments or concerns, please contact Jennifer Duell Popovec