WASHINGTON, DC — Age-qualified, active adult rental communities are evolving as a property type and now are recognized as an important part of the senior living continuum, according to a panel of experts who explored the topic this week at the National Investment Center for Seniors Housing & Care 2024 Fall Conference.
With the 65-to-74-year-old age group being the fastest-growing group of renters in senior housing, the active adult segment provides “compelling growth” in the “younger old” cohort, providing an opportunity for developers to enter the space and provide options for prospective senior housing residents, Senior Housing Consulting Principal Mitch Brown said.
The panelists discussed the potential for the active adult segment to help meet the housing demands from the largest demographic wave in the history of seniors living, along with recommendations and lessons learned from the first wave of new supply.
The Carlyle Group first entered the senior housing space in the early 2000s. Ten years later, the company had a major pivot, becoming the first large capital provider to focus on active adult, Carlyle Group Vice President Taylor Sealey said.
There’s a lot to like about seniors housing, Sealey said, including the demographic growth profile and the credit profile of the tenants. But active adult also had struggles in attracting investors due to lower operating margins and high levels of turnover. People questioned whether the industry could cater to a younger older adult in a service-light model.
The active adult property type, Sealey said, met the definition for a service-lite model for the youngest older adults. The sector’s appeal grew during the COVID-19 pandemic, with 0% bad debt and 100% in rent collections. Older adults pay their rent, he said.
Greystar is the largest active adult operator, with 130 properties under its management, said Michael Levin, senior managing director of Greystar Property Management. He said that the company developed three-person teams for each community — covering sales, operations and marketing — and those team members are supported by regional maintenance teams and national accounting and management teams.
The model, Levin said, has allowed Greystone to create a culture that works for residents and allows community staff members to spend more time with residents. He said the company is launching a new lifestyle and hospitality program in 2025 to increase the personal touch and differentiate the brand from others in the field.
Looking back, Sparrow Partners CEO and co-founder Jeff Patterson said he would do much differently, including the way the company markets active adult communities. Patterson said he has learned that consumers researching active adult communities aren’t actually searching for “active adult.” In Dallas, he said, they are searching for “senior living” or “senior housing,” and in Las Vegas, they are searching for “retirement communities.”
“It’s different market to market,” he said.
Promoting interest in active adult
The biggest hurdle for active adult communities is confusion about what they are —- senior housing or multi-family, the panelists said, arguing that properties are closer to conventional multifamily buildings.
Clover Group President Michael Joseph said that multifamily developers need to become involved in the active adult space, to help increase supply, because “they understand what we do.”
Another challenge with the property type, according to the panelists, is growing capacity. Brown said that operators must create scale to be profitable, but they need to run a community as they would a multifamily property. The “extremely thin” margins in active adult mean properties have limited staff who must function as a “jack-of-all-trades,” he said.
The profile of the active adult property type was raised during the COVID-19 pandemic due its stable performance. The lending community, according to Matt Wallach, managing director of Walker & Dunlop, now recognizes active adult as having a better risk-adjusted return, which he said is leading to better debt terms and a smoother underwriting process.
In a 2022 white paper, NIC defined active adult rental properties as “age-eligible, market rate, multifamily properties that are lifestyle focused; general operations do not provide meals.” NIC released the definition in an effort to unify thinking and help potential investors.
