Location, Location, Location — Strategic Real Estate Considerations for Senior Living Communities

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A senior living community’s ability to maximize the effective use of its real estate assets often plays a key role in the success of the community and the happiness of residents and staff. This is especially true for continuing care retirement communities (CCRCs), whose campuses typically include many different types of residences, dining venues, recreational facilities, specialty healthcare services and other amenities for residents and staff.

The initial development of CCRCs and other senior living facilities is laden with complexities, but the importance of thoughtful real estate design does not end when the doors of a facility open. Instead, devoting continued attention to real estate strategy can help senior living communities prepare to tackle future issues and achieve many short-term and long-term objectives.

Below are examples of ways the strategic acquisition and development of real property can impact senior living communities.

Addressing Changing Resident Preferences. The desires of senior living residents are changing rapidly as the baby boomer population enters senior living communities. Similarly, the long-term care needs of seniors are evolving as life expectancies continue to increase. For senior living communities, the ongoing shift in residents’ wants and needs has created a demand for additional real estate that can be used to address the requirements of existing and future residents. In addition to simply expanding the size of a community’s campus and increasing the number of residential units, new real estate assets can be used to:

  • Develop healthcare facilities designed to address emerging resident care needs, perhaps including specialty memory care facilities, and additional assisted living and skilled nursing facilities.
  • Construct additional recreational facilities and requested amenities, such as pickleball courts, spas or massage therapy centers.
  • Develop multipurpose facilities serving on-campus and off-campus customers (e.g., retail businesses catering to a senior community’s residents and the local community at large).

Independent Living – Single-Family Homes. In addition to facing new healthcare needs and shifting amenity preferences, senior living communities recently have experienced an increased demand for accommodations styled as single-family homes (see further discussion in McGuireWoods’ Aug. 30, 2023, legal alert, “Real Estate Trends in the Senior Housing Sector”). Some CCRCs and firm clients have successfully addressed this increased demand by acquiring existing single-family homes near their community’s campus and converting the homes to residential units for residents. This approach allows the CCRCs to meet the desires of residents seeking stand-alone housing (as opposed to apartment-style accommodations), while simultaneously increasing real estate holdings and revenues, as the larger accommodations often are coupled with increased entry fees and/or monthly dues. Note that the acquisition and conversion of existing homes in this manner requires a careful evaluation of public and private restrictions and requirements, such as zoning ordinances, private real estate restrictions and existing financing covenants and requirements. That analysis should be performed early in the process of deploying this strategy, and McGuireWoods has assisted clients in navigating these hurdles.

Acquisition on Adjacent Property. Senior living communities can achieve several strategic objectives by acquiring additional real estate adjacent to the boundaries of their existing campuses. Perhaps most importantly, the acquisition of additional land helps provide certainty for a community and protection against future issues by creating a buffer between the existing campus and future, adjacent development that may be incompatible with senior living facilities. Acquisition of undeveloped real estate also increases green space within communities and can help create a more private and peaceful experience for residents and staff. In addition, the acquisition of land assets generates operational flexibility for communities as the needs and desires of residents evolve, since land can be developed for future projects. Firm clients have experienced short-term and long-term benefits from this strategy on multiple occasions.

Non-Adjacent Properties. Although the previous section considers the acquisition of land adjacent to existing communities, senior living communities certainly can benefit from the acquisition of real estate that is not adjacent to their existing campuses. For example, acquiring additional real property across town can provide a single-site facility that has outgrown its campus with opportunities to continue developing new facilities for residents and staff, and to partner with local organizations to develop community centers and other multipurpose facilities. Similar to the section above, the acquisition of non-adjacent properties also increases operational flexibility.

Employee Housing. In addition to the benefits described above, the acquisition of existing single-family homes and other residential properties enables senior living communities to cater to their employees through employee housing. Senior living communities, like businesses across numerous industries, continue to encounter challenges in the labor market, and the ability to offer quality employee housing can be a significant advantage for a community seeking to differentiate itself in a competitive labor environment.

Timing and Construction. Timing is everything, particularly for real estate development. It often takes several years to navigate a new project through the processes of designing plans, obtaining relevant entitlements and approvals, securing financing and completing construction, so senior living organizations need to plan ahead and consider future real estate needs as part of their strategic planning processes. In addition to the actual timeline from initial conception of a real estate project to the completion of construction, senior living communities should be mindful of the scheduling of construction work, which can interfere with the day-to-day activities of residents and staff and may require the closure of dining and recreational facilities. Also, for communities that have experienced continued or significant growth, the correct phasing of construction activities can help prevent construction fatigue among residents and staff.

McGuireWoods has helped senior living clients deploy all of these real estate strategies in the pursuit of various objectives, and clients often use a combination of these approaches to ensure they are satisfying the immediate needs of residents and staff, while also planning for future challenges and opportunities.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

© McGuireWoods LLP

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