The luxury senior-living sector is booming

A once-struggling tower in Chicago just sold for twice its 2012 sale price

1802 2nd Avenue (Credit: Google Maps, iStock)
1802 2nd Avenue in Manhattan (Credit: Google Maps, iStock)

The 53-story Clare tower on Chicago’s Magnificent Mile has sold for $105 million, a sign that luxury senior living facilities hold huge upside in today’s market.

Fundamental Advisors LP sold the luxury seniors-only tower for twice what the private equity firm paid for the 334-unit tower in 2012, according to the Wall Street Journal.

The sale is a good sign for investors backing luxury senior living projects. The wider senior living sector has been held back by oversupply over the last several years as developers rushed to build new communities for the aging baby boomer generation. They’ve tended to stay in their homes longer than many industry watchers thought, leaving many new apartments are empty.

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But some developers and investors are still betting that seniors will want to rent in urban areas after selling homes in the suburbs. The development costs associated with the projects, including the high cost of land in cities, means most of these urban senior developments will be pricey.

A unit at the Clare costs an average one-time entrance fee of $800,000 or so, along with around $5,500 monthly fees. The entrance fee is refunded when a resident dies or moves out. Entrance fees at a typical senior living facility is around $369,000.

Rents for a top-end unit at the recently opened Inspir Carnegie Hall, a senior living and assisted living project on Second Avenue in Manhattan developed by Maplewood Senior Living and Omega Healthcare Investors, run around $20,000.

Fundamental Advisors bought the Clare out of bankruptcy and poured around $20 million into the project. The project was developed by the Franciscan Sister of Chicago, a religious organization, and underperformed at launch just after the 2008 financial crash. [WSJ] — Dennis Lynch