There’s a surge of senior housing development in Southeast Michigan as developers look to meet rising demand and take advantage of available capital.
Projects ranging from high-end and market-rate senior living communities and expansions to a handful of affordable or low-income housing projects are in the works.
While demand for affordable housing has risen post-recession, those projects are comparatively few, given the lack of federal dollars to support them and the complexities of putting them together, developers said.
For this report, Crain’s identified nearly two dozen senior living developments underway or planned in Southeast Michigan. The projects total about $500 million in planned investment. (See chart below.)
Spurring the construction are retiring baby boomers and the aging population in general, said Dietrich Knoer, chief investment officer at Redico LLC, part owner of Bloomfield Hills-based American House Senior Living Communities.
That, along with the need to renew existing senior housing, is creating a “development-friendly environment,” he said.
Also fueling the projects is an abundance of debt and equity capital for senior housing, Knoer said.
Senior housing projects underway or planned in Southeast Michigan
Source: Crain’s research
High-end senior living
Rather than remain in their own homes, many seniors are looking to move to age-restricted residential communities because of the active and more connected lifestyle, said Sam Beznos, CEO and partner of Farmington Hills-based Beztak Cos.
The definitions of each type of housing and care have also blurred to some degree, he said. For example, independent living communities, such as one Beztak is developing with Southfield-based Etkin LLC in Birmingham, are incorporating third-party health care as an amenity for their residents.
That means people can continue to live there even as they need additional health care, rather than moving into assisted living, Beznos said.
“Everybody has their own take on how they’re operating,” he said.
Beztak and Etkin are co-developing the $26 million All Seasons of Birmingham along Maple Road, east of Woodward Avenue, with 131 independent living apartments and two to three meals per day offered.
The development is expected to be completed in May, with prices ranging from $2,800-$5,500 per month, Beznos said.
It will include eight “live-work” apartments on the ground floor, geared for the retired architect, tax preparer or attorney who practices from time to time and “wants to live in a facility like ours,” Beznos said.
Beztak came up with the live-work concept, a new approach for senior communities, because Birmingham was looking for mixed-use on that site, he said. And “a lot of the people who are moving to these communities … don’t want to just stay home and play cards.”
Beztak also has independent senior housing planned for the Cherry Hill mixed-use development in downtown Canton Township and another 125 units slated for an undisclosed location in Ann Arbor. The two projects will comprise an investment of more than $52 million.
Troy-based Pomeroy Living LLC also sees opportunity in high-end senior living. It’s in the midst of doubling its local portfolio from 600 senior residences to 1,200, President Stefan Stration said.
Last spring, Pomeroy added assisted living and memory care to its Sterling Heights campus, collaborating with Oakmont Senior Living. In April, the developers plan to open the same types of housing on Pomeroy’s Rochester Hills campus along with 120 units of independent living by fall, Stration said.
Also on tap for Pomeroy: development of new assisted living and memory care senior housing in Northville Township and construction of age-in-place communities in Orion Township and Plymouth Township.
Pomeroy’s communities, similar to other retirement community operators, allow residents to pay for care-related services as needed, Stration said. Villas start at $2,500 per month, apartments start at $3,500 per month and assisted living starts at $4,500 per month.
Pomeroy plans to invest a total of about $150 million in the expansions and new developments between 2013 and 2017, Stration said.
The time is right for Pomeroy’s approach to senior communities, which incorporate personal choice, are integrated with the surrounding community and promote ongoing contributions through mentoring and volunteering, Stration said.
Hybrid developments
In the middle market, Southfield-based Presbyterian Villages of Michigan and Hartford Baptist Memorial Church are developing 84 units of independent living, with a combination of market-rate and affordable housing, in northwest Detroit. Construction on the $14 million-$15.5 million project, which will be open to those age 55 and above, is expected to start in the spring and be completed within 10-12 months, said PVM President and CEO Roger Myers.
Hartford Village will include 34 detached cottages and an apartment building with 50 one- and two-bedroom units. Twenty of the units will be below market rate, a factor that helped attract support from the U.S. Department of Housing and Urban Development,the Troy-based Kresge Foundation and the Detroit-based Community Foundation for Southeast Michigan.
“Up until now, everything we’ve been involved with in the city of Detroit has been serving low-income seniors,” Myers said.
With affordable senior living communities, if renters are even $1 over the income limit, they couldn’t live in those buildings according to the parameters of the government funding for such projects, he said. The community will serve people at moderate to higher incomes and won’t restrict anyone based on income.
“It’s a product that doesn’t exist in Detroit,” aimed at meeting a demand for market-rate housing for people who had moderate income, have been lifelong Detroiters and want to stay or come back to the city, he said.
There’s already a waiting list for the 64 market-rate apartments in the development, Myers said.
Many seniors are drawn to downtown settings or apartment living. National trends are showing more people — seniors as well as millennials — are moving back into cities and into multifamily homes, said Jamie Schriner-Hooper, executive director of the Lansing-based Community Economic Development Association of Michigan.
There’s not an abundance of senior living complexes in those areas, so many seniors are just moving into general apartment buildings, she said.
“I think more developers are beginning to realize this is a niche in which they could and should be working,” she said.
In the suburbs, American House Senior Living Communities has several market-rate options in the works. It plans this spring to open 84 units of independent senior living on the second and third floors of the former Cottage Hospital in Grosse Pointe in 92,000 square feet of space purchased from Henry Ford Health System.
It’s also adding memory care at both its Rochester and Roseville campuses, and plans a new senior residential community with assisted and memory care at its Dearborn Town Center medical office building campus, said Dale Watchowski, president and CEO of American House and president, COO and CEO of Redico, part owner of the senior community operator.
Senior communities of a projected 100 units each are also planned as part of two high-profile developments Redico is working on: the $160 million mixed-use development planned at the former Michigan State Fairgrounds in Detroit, under development with an investment group that includes Earvin “Magic” Johnson, and the Bloomfield Park mixed-use development at Square Lake and Telegraph roads.
Affordable senior living
Despite an acknowledged need for affordable or low-income senior housing, new local projects on that end of the market are few and far between.
“If you look at the people who retired 20 years ago, a large number had pensions,” said John Thorhauer, president and CEO of Chelsea-based United Methodist Retirement Communities.
“The people we’re starting to see (retire) now, … frankly, have less pension programs available, or their pension programs have been cut.”
The percentage of the population entering retirement and its need for affordable housing has grown faster than the availability of senior housing options, he said. And federal policy has not kept pace with that growth.
The U.S. Department of Housing and Urban Development’s primary funding program for affordable independent senior living construction and operating subsidies, Section 202, has not been funded by Congress for the past two years, said Michael Polsinelli, director of HUD’s Detroit field office.
The program provided nonprofit developers with grant funds to construct affordable senior housing and also provided operating subsidies.
The last local project to receive the funding was the $43.5 million, affordable senior living community on Detroit’s east riverfront developed over the past few years by United Methodist Retirement Communities and Presbyterian Villages of Michigan.
The two nonprofit developers took on the project in 2010-11 because “we were aware of this desperate need in the city for a broader array and expanded services,” Myers said.
The Edward N. and Della L. Thome Rivertown Neighborhood was one of two projects statewide spurred by the state’s request for proposals for affordable assisted living projects in 2006. The other was developed by Genesis Non-Profit Housing Corp. in Grand Rapids, Thorhauer said.
The Rivertown project also drew funding from the Michigan State Housing Development Authority and a $2 million grant from the Community Foundation.
“We certainly know there is a need for high-quality housing for seniors, particularly for Detroit when we’re trying to attract new residents,” said Katie Brisson, vice president, program for the foundation.
Rivertown includes an affordable assisted living complex in one of two former Parke-Davis manufacturing facilities on the Detroit campus, opened in the spring of 2013, and a $7.5 million independent senior apartment building with 50 apartments. The apartment building leases were filled within three hours of opening last October, Thorhauer said.
Renovations to an existing building on the property to convert it to 24-hour care senior apartments, and development of a community center and café and the RiverGarden community park adjacent to the building, should be completed by summer 2016.
The community also includes PACE (Program of All-Inclusive Care for the Elderly) Southeast Michigan, a nationally recognized, comprehensive adult day care and health services program for seniors living in the surrounding community, co-owned with Henry Ford Health System.
Rivertown is just scratching the surface of the real need in the city of Detroit for affordable assisted living and other higher levels of care for seniors, Myers said.
But few developers are looking at them, given the minimal government funding to back affordable senior living projects and the complexity of coordinating funding, Thorhauer said.
Developers looking to build a building can get tax credits for that, “but if you are going to do assisted (living), on top of building the building, you have to coordinate the personal care or Medicaid waiver services, work with Area Agency on Aging and coordinate (HUD’s) Section 8 for rent and a meal program,” he said, for each resident.
UMRC and PVM raised just under $1 million to fund the startup costs of coordinating those pieces, Thorhauer said. And UMRC is bearing the roughly $150,000 each year to coordinate the benefits annually for residents.
The need for affordable housing is one of the things attracting developers Bob Jacobson and his father, Michael Jacobson, to Detroit, as well.
Through Ann Arbor-based LC Consultants LLC, the Jacobsons — who own Leelanau Wine Cellars Ltd. in northern Michigan — plan to develop a building in Detroit’s Midtown area into 98 units of affordable housing.
“We think there’s a need for it,” Bob Jacobson said. And “we think it’s a great part of Detroit to be investing in.”
LC Consultants has a purchase agreement on the building at 59 Seward St. between Second and Woodward avenues for an undisclosed amount.
Jacobson expects the deal to close by August, and the building to open roughly a year later, in fall 2016.
The Michigan State Housing Development Authority awarded the project $2.46 million in low-income housing tax credits. It’s one of only a handful of new senior living developments to receive the credit in recent years.
MSHDA is directing the majority of its available funding for affordable senior housing to efforts aimed at preserving housing built during the 1970s and 1980s, said Chris LaGrand, the state agency’s chief housing investment officer.
Since 2011, MSHDA has provided a total of $5.87 million in low-income housing tax credits to help fund affordable senior living projects in metro Detroit and nearly double that, or over $11 million, toward renovation of existing senior housing in the region.
“From our perspective, what we’re doing is making sure we don’t lose the (units) we’ve got,” LaGrand said.
“If we don’t go in and finance (those), then potentially that becomes sub-standard housing or it stops being affordable housing — someone comes in and makes it market.”
