Sam Faye’s voice rises as he describes what makes Capriana, a new retirement community in Brea slated to open next month, worth monthly fees sometimes in excess of $6,000.

The executive director of the 121-unit complex rattles off a list of amenities: movie theater, art studio, gym, day spa, salon, bar.

“It’s closely akin to a cruise ship,” he says, “for seniors.”

Construction of new senior housing stalled during the recession as financing dried up and home sales plummeted. But the market has picked up momentum recently, and developers are forging ahead.

Capriana is one of more than a half-dozen senior housing developments in the works or recently completed in Orange County. The projects include top-of-the-line complexes, low-income apartments and standalone homes nestled in the new community of Rancho Mission Viejo.

“There are more and more communities that are in development stages,” Faye said. “The demand for senior housing is growing. It’s going to continue to grow because the population is aging so rapidly.”
By 2015, the 55-and-over population in the United States is projected to jump more than 16 percent to 88 million as more baby boomers hit retirement age, according to the U.S. Census Bureau. By the end of this decade, that group is expected to grow to nearly 100 million.

Investors, particularly those in real estate investment trusts – called REITs – are looking to capitalize on those trends, flooding the $300 billion market with new capital and boosting deal activity.
“This is the fastest growing segment of the entire real estate industry,” said Dave Stolte, senior vice president of the senior housing division of brokerage NAI Capital in Newport Beach. “Every
REIT in the United States is chasing senior living product and operators and developers. There’s more money coming our way than at any time in history.”

Limited supply

Senior housing encompasses a broad range of dwellings, from age-restricted units to nursing care facilities that offer 24-hour service to residents with complex medical needs.

Victor Regnier, a senior housing expert and USC professor, said assisted-living homes fared relatively well through the recent downturn because they offer need-based rather than discretionary services. Many seniors, though, put off moving to age-restricted communities while money was tight.

According to data from the National Association of Homebuilders, the number of units sold or rented to seniors fell from about 256,000 nationwide in 2005 to less than 68,000 in 2011. But the numbers are picking back up. The homebuilding group expects this year’s figure to climb 22 percent from 2012 (82,339 units) and another 40 percent in 2014.

With more seniors looking to move, developers are struggling to keep up.

“There’s just not a whole lot of supply available,” Regnier said. “As the market in general feels higher levels of optimism, I think you’re going to see all of these housing types come back.”

One company looking to fill the gap is Meta Housing Corp., a Los Angeles-based developer of about two dozen affordable and market-rate senior apartment complexes in California. The company recently completed projects in Tustin, Long Beach, Hollywood, North Hollywood and downtown Los Angeles. Meta Housing is working on several other projects, including a 76-unit low-income apartment complex in San Clemente for residents 55 and older.

“We’ve been pretty busy in the last couple of years,” said Kasey Burke, executive vice president of Meta Housing.
He noted the particular appeal of Orange County, which has the right combination of wealth and a large aging population to drive demand for all types of housing. “Orange County is a great area to be building right now.”
Burke said he has seen a shift in investor interest as the market has heated up. Now, the well- heeled investment trusts that had focused on hospitals and other health care properties are finding big returns in senior housing.

Jeff Theiler, a research analyst with real estate research firm Green Street Advisors, noted that two large investment trusts, HCP Inc. and Ventas Inc., have each made billion-dollar acquisitions of senior housing recently. Over the past year, the firms’ stocks have risen about 30 percent, far outpacing the broader REIT index.

“Senior housing has been the preferred property type for the last few years of the large health care REITs,” he said. “The demographic story for senior housing is very good.”

Retirement home developer Merrill Gardens, which is building its first Orange County project in Huntington Beach, recently raised $150 million from investors to support new development. Bill Pettit, the company’s president, said he expects to see these investments continue. “That’s something that I think we’ll see more and more,” he said. “Unless we continue to add more supply, we’re going to have a shortage in senior housing.”

Luxury trend

Several new Orange County projects are looking to upgrade retirement homes’ reputation. In other words, the cafeteria food and bingo halls have been replaced by sushi chefs and putting greens.

In Newport Beach, Vivante on the Coast – a 185-unit, resort-like community currently under
construction – is at the forefront of the trend toward luxury. The complex will offer a yoga deck, movie theater and indoor saltwater pool, among many high-end amenities.

Units in the community, as well as those in the similarly luxurious Capriana, will offer upgraded stone countertops and high-end appliances – and come with big price tags to match. Vivante charges an upfront fee of $3,500, but monthly rents can range from about $4,000 to $11,000. Capriana’s monthly rents are lower – between $2,900 and about $6,000 – but entrance fees can run as high as $849,500 for a three-bedroom unit.
“We feel that we give a great value for what we charge,” said Faye, Capriana’s executive director. “It is definitely a luxurious environment.”

Arguably the most-watched development in Orange County’s senior housing market will come online in June, when the developers behind the master-planned communities of Mission Viejo, Rancho Santa Margarita and Ladera Ranch plan to unveil the first phase of Rancho Mission Viejo. The initial community, Sendero, will include a neighborhood called Gavilan, a senior-living development of 286 single-story homes ranging from about $400,000 to nearly $1 million.

Rancho Mission Viejo’s master plan calls for 14,000 homes to be built over the next three decades. A whopping 40 percent of those, or about 6,000 units, will be reserved for residents 55 and older, making it one of the larger senior housing developments in Southern California. By comparison, the 55-and-over community of Laguna Woods Village has more than 12,000 homes.

Not only will Rancho Mission Viejo have a greater proportion of senior homes than is typical for
master-planned communities, but it will be rolling out a different model for how 55-and-over communities are designed.

Developers plan to intersperse senior-living neighborhoods within Rancho Mission Viejo rather than keeping them all together in a standalone community. Paul Johnson, vice president of community development for Rancho Mission Viejo LLC, said the plan came out of research showing many older homebuyers appreciate the amenities of senior-living communities but still want to be near people of all ages.

“We are really pioneering a new approach to delivering the 55-plus homes intermixed inside a master-planned community where there are all ages,” he said. “It is a new paradigm.”

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