A Close-Up on South Florida’s Senior Housing Sector

ZOM Senior Living Vice President Brett Gelsomino discusses the prospects for the industry in light of the current economic situation.

Brett Gelsomino, Vice President, ZOM Senior Living. Image courtesy of ZOM Senior Living

Brett Gelsomino, Vice President, ZOM Senior Living. Image courtesy of ZOM Senior Living

Although the National Investment Center for Seniors Housing & Care announced that occupancy rates at senior housing properties across the U.S. declined to an all-time low in the second quarter of 2020, developers were not discouraged. In South Florida, an area that traditionally attracts retirees, ZOM Senior Living recently acquired sites for two luxury senior living communities in Coral Gables and West Palm Beach. Vice President Brett Gelsomino believes that the Miami area will be among the greatest beneficiaries of the exodus from high-density cities in the Northeast.  

What is the outlook for the senior housing sector in South Florida for the next couple of years? Gelsomino shared his thoughts and explained why his company decided to move forward with new developments in the middle of a pandemic. In the interview below, he also laid out his views on how demand for senior living communities is most likely to perform in the post-coronavirus climate.

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The senior living space has been under the spotlight ever since the health crisis began. How has the pandemic affected the industry in South Florida?

Gelsomino: Near term, the industry has experienced mild suffering, primarily as a result of fewer people moving about. Senior housing consists of additional subsets, ranging from active adult, independent living and assisted living, to memory care and skilled nursing. The unfortunate events that have been reported have been largely concentrated in skilled nursing, while many operators can posit that their residents in independent living, assisted living and memory care are arguably better off in their care, versus at home.

Just by way of comparison with other commercial real estate sectors, where collection rates and fundamental demand have clearly been disrupted, the fundamentals for seniors housing are measurably better: Collection rates remain strong, the residents do not rely on employment income to pay their rent and their housing needs do not rely on job creation. In managing senior housing properties, a priority has been to protect the health of the residents, who are one of the groups most vulnerable to COVID-19. The industry remains one of the most attractive investment classes in commercial real estate today.

What can you tell us about demand for senior living properties across South Florida, considering the current economic context?

Gelsomino: All of the data points within our peer sets have remained fairly resilient under the current conditions. While move-in and move-out activity may presently be below average, we view this as more of a temporary logistical constraint than an indication of weakening demand. One consequence of the precautions being implemented to protect current residents is that in-person traffic is down.

The long-term fundamentals of the space remain compelling and many operators are reporting pent-up demand in the wake of COVID-19. It is just a matter of determining when and how to safely begin processing new resident move-ins. We are hearing that many prospects and their families feel that senior housing is, in fact, a safer choice than home. However, if outside visitation is disallowed, it makes it easy to delay the near-term decision.

You’ve recently acquired sites for two new senior living communities in Florida. What drew you to that area?

Gelsomino: Coral Gables and West Palm Beach mark our second and third senior living development deals in Southeast Florida. A few factors can be credited for this concentration. Florida, more specifically South Florida, boasts incredibly strong demographic trends. About 1,000 people per day were moving to Florida pre-COVID-19, and one-third of those are settling in Southeast Florida. To its credit are factors like tropical weather, cost of living, economic and employment opportunities, cultural offerings and favorable taxes.

We are hearing that the tailwinds driving people to Florida are now even stronger, as people seek to escape the highly dense cities of the Northeast in favor of lower density, lower cost of living and lower taxes. While these migrations consist of people of all ages, adult children that might be moving for a job or other reasons play a significant role in the decision-making process for where their senior parents might end up in their retirement years. As such, we see the outlook for senior housing in Florida remaining extremely bright.

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Tell us about the 350 luxury rental apartments for seniors you plan to deliver in Coral Gables and West Palm Beach.  

Gelsomino: Watermark West Palm Beach and Watermark Merrick Park in Coral Gables are mid-rise projects with eight stories, highly amenitized and in downtown, walkable locations. The communities will feature a rooftop pool and sky lounge, wellness center, spa and salon, art gallery, multiple dining venues, including a gourmet restaurant and casual bistro, sports bar, library and business center. They will also offer garage parking with valet service, as well as complimentary transportation services in luxury motor cars, and concierge services.

To co-develop and operate these communities, we are partnering with Watermark Retirement Communities, which is also innovating and developing seniors housing in urban locations. Each development consists of a full continuum of care, including independent living, assisted living and memory care, depending on the needs and wants of the resident and their family. Many projects of this quality and caliber are only offered in a condo-style ownership model, requiring a seven-figure investment, in addition to paying significant monthly service fees. Our senior living communities are for rent, enabling us to provide a more attractive offering to our residents and their families.

M&T Bank and PNC Bank provided construction loans for these two projects. What type of financing did you obtain?

Gelsomino: Both projects are financed by conventional construction loans, with competitive pricing. ZOM and our partners have well-established relationships with these lenders and we appreciate their confidence in providing debt financing for these projects. We have a unique opportunity to build through the current market conditions and deliver new units in mid-2022, when there should be significant pent-up demand and a dearth of new supply coming online.

What other regions in the country are you interested in expanding in?

Gelsomino: ZOM has offices in Fort Lauderdale and Orlando, Fla., Dallas, Washington, D.C., and Raleigh, N.C., and is expanding into other gateway cities both north and west. We have senior development pursuits as far west as Arizona and as far north as Boston, with the intention to scale across our existing coverage area and perhaps into some new markets in between, in the near future.

How do you expect the senior living housing market in South Florida to evolve?

Gelsomino: Much of the senior housing stock in South Florida is very old, poorly located and underwhelmingly appointed. That said, much of it is successful in spite of what we view as shortcomings, primarily due to the very strong demand. As new supply comes online, the market is going to become segmented between the soon-to-be-obsolete, 25-year-old product and the new product.

We hope to lead the effort in dispelling myths and stereotypes about what senior housing is by showing its full potential. We hope that our communities will appeal as much to the adult children, as to the seniors that will live there. The way we communicate with and compete for our customers will also evolve as the space becomes more educated, segmented and competitive, especially in South Florida.

Rapid advances in technology and the sophistication of our customers and their families are going to change how we most effectively reach our customer base. My 90-year-old grandma has an iPhone and uses Facebook. We feel that is the future of our consumers, and a shift to more sophisticated and even entertaining forms of media will be expected, if not required, to capture the attention of our future residents.

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