I had lunch yesterday with Robert Kramer, Founder and Strategic Advisor of the National Investment Center for the Seniors Housing and Care Industry (NIC). In the course of our conversation, Bob mentioned that National Development and Epoch Senior Living were proposing to develop 130 units of upscale senior housing on the former headquarters of GE Capital Corporation in Stamford, Connecticut. http://www.courant.com/business/hc-br-plans-former-ge-building-developed-into-senior-living-home-20180815-story.html. This led me to re-post my blog from February 2016 on the opportunity to reuse suburban office locations for seniors housing – see below.
The Wall Street Journal on Tuesday, February 9, 2016 featured an article entitled “Office Glut Strains Suburbs – Landlords, officials at odds over revamping vacant campuses as firms leave for cities”. The article highlights a growing trend of major corporations abandoning leafy suburban headquarter’s campuses for urban locations where transportation options are better and it is easier to attract tech-savvy Millennials. The article focuses on the relocation of Pearson Education from its Upper Saddle River, N.J. site to locations in Manhattan and Hoboken, N.J.
The site Pearson is leaving is a 47 acre site in a wealthy town of about 8,000 people located about 30 miles northwest of Manhattan. It features a “bunkerlike” structure of grey concrete built in 1973 for Western Union with 470,000 sq. ft. of space and few prospects. The suburban couplex is owned by publicly traded Mack-Cali Realty Corp. (CLI). The building previously generated annual revenue of $8.6M but after testing the market, Mack-Cali found no office takers. The company is proposing to replace the former Pearson Education headquarters with 240 apartments, which some in the town oppose because it would change the character of the community and generate expenses for public services while bringing in less taxes than a corporate office property. Other locations noted in the WSJ article with similar former headquarters locations include: the former Bell Labs headquarters in Holmdel, NJ; BASF’s former North American headquarters in Mount Olive, NJ and the former home of Merck & Co. in Readington, NJ.
None of the real estate owners or developers cited by the WSJ were mentioned to be considering a continuing care retirement community (CCRC) as a primary reuse for these corporate office sites or as a principal use in a larger mixed-use complex that might combine office and retail and non-age restricted housing together with a CCRC. Yet, a CCRC would appear to offer a number of benefits. Principally, a CCRC would:
- Target the existing older, affluent residents of the wealthy suburbs where these former headquarters are located.
- Likely generate more in tax revenue than would be required to service the CCRC because CCRC residents would not have children in public schools.
- Generate less in the way of traffic congestion than conventional apartment or condominium development and less than a former corporate headquarters.
- Generate spending in the community for existing or to-be-built retail space.
- Generate demand for additional healthcare and other services that might be found in the community or incorporated on the site.
- Generate greater demand for employment on the site and potentially taxes than would a conventional housing development.
CCRCs typical range in size from about 250 units including a mix of independent living, assisted living, memory care and skilled nursing or healthcare units/beds to as many as 2,000 units/beds in large complexes that have principally been developed by Erickson Living. While there is an emerging trend among seniors housing developers, like office developers, to consider higher density, mixed use urban locations, I believe there is still significant demand for suburban CCRCs, particularly in wealthy, aging, hard to develop locations, like northern New Jersey, where the corporate headquarters sites noted above are located.
CCRC’s are typically developed in either an entrance-fee or rental format. In an entrance-fee format, residents pay an upfront fee that may be partially or fully refundable. This fee is used to repay construction debt and the non-refundable portion is amortized over time to reduce the monthly cost of housing and care. In a rental format, there is no entrance fee, more long-term financing is used and monthly rent must cover the full cost of housing and services. The largest CCRC campuses typically incorporate multiple casual and formal dining venues, pools, gyms, lecture halls, entertainment and recreational amenities and may include full physician practices and their own health plans as well as health centers that provide therapy space.
In 2014, while I was still working in investment banking, I pitched seniors housing as a reuse for some undeveloped or partially developed suburban office locations to a publicly traded suburban office REIT. However, the sites this company had available at the time were not as large or as well located as the corporate headquarters’ sites noted above and were not well suited to CCRC developments of scale. While CCRCs are well outside the comfort zone of most office owners/developers, outright sale of large suburban headquarters sites for this purpose or joint venture development with existing owners of suburban headquarters sites and CCRC developers or healthcare REITs would appear to be a very viable option for such locations, particularly in cases where a CCRC would be an element in a larger mixed use campus that might include some conventional apartments (potentially for staff), retail and office/healthcare uses.
4 thoughts on “Reusing Suburban Corporate Headquarters As CCRCs”
Have always wondered why it takes so long to get CCRCs entitled in general. As you suggest, they would seem to be good employers and taxpayers with minimal negative externalities. Is it just that rich towns don’t want to build anything at all, or what are the specific objections to this use?
CCRCs tend to be larger developments, ofter 350 units or more, and therefore suffer the entitlement difficulties of any larger real estate project, particularly when being developed in affluent suburban areas. I believe they are still relatively easier to entitle than pure commercial projects of similar scale because they have less impact on traffic and schools but that doesn’t make them easy. Thanks for your comments
Your suggestion calls for careful consideration. All the sites mentioned are in wealthy suburban settings where there are large homes which must have lots of folks ready to downsize and money to pay for it
I know this asset well. Good angle — CCRC. CLI has at least six other re-purpose situations; all suburban office to ‘something else’
Hope all is well. Is appropriate, add me to your blog. And, let’s have lunch @ MD Club this Spring.