These days, it’s not uncommon to stumble upon a medical office or health care clinic within a shopping mall or large retail center.
Soon, that may also be true of senior housing communities, Gene Ventura, senior managing director at Irvine, California-based boutique investment advisory firm Faris Lee Investments, told Senior Housing News.
Ventura and his colleagues at Faris Lee work in an advisory capacity with real estate owners to determine how to best monetize unused or underutilized land. In recent years, it’s become apparent to the firm that senior housing developers could borrow a great deal from developers of shopping centers.
In fact, senior housing developers may benefit from buying land once used primarily for retail, Ventura suggested.
It’s commonly known, for instance, that online retailers have increasingly driven shoppers away from traditional, brick-and-mortar storefronts—and numerous retailers have suffered financially as a result.
Some companies, like Sears, have shuttered hundreds of their physical locations, leaving vacant storefronts in malls and large, empty buildings nationwide.
“Large boxes are not being re-tenanted for like-kind users. They are being repositioned,” Ventura explained.
Plenty of other shopping center sites also include excess, undeveloped land, but the current vulnerability of brick-and-mortar retailers renders it difficult to justify building another physical structure there for retail use, Ventura suggested. As a result, landowners in this position must get creative with vacant buildings and undeveloped land.
“They’re looking at ways to redevelop that so they can monetize the space again and get their asset back to cash-flow status,” Ventura said.
Selling the land to a senior housing developer makes sense for a plethora of reasons, he concluded.
“Retail has always been the best-located product, for obvious reasons,” Ventura said.
Senior housing, on the other hand, has traditionally been built “out in the pasture, or somewhere out of the way.” If a senior housing community were built on land originally intended for retail, it would have greater visibility, and more integration within the community at large.
Ventura knows this from experience.
Faris Lee recently worked on a deal involving a former Wells Fargo office building, which “10 years ago… would have been bought and re-tenanted,” Ventura said.
Instead of searching for another bank to lease the vacant space, Faris Lee conducted a senior housing market study and found that the site’s location near major hospitals and expressways, among other things, made it a strong candidate for a senior housing development.
The best path forward, then, was to demolish the entire office building and build an independent living, assisted living and memory care community on the six-acre site, Faris Lee determined.
“When you look at the price matrix, it absolutely made sense,” Ventura said. In fact, many owners of retail centers can sell their land to senior living developers “for a much higher price than they had ever envisioned.”
All the while, this concept is far from mainstream.
“It’s a really new idea,” he said, noting that several retail landowners he had spoken with at a conference had never considered selling land to senior housing companies before.
Still, it’s an idea that should catch on.
“Retail, to me, is basically one of the best property prototypes for new senior housing developments,” Ventura said.
Written by Mary Kate Nelson