It’s not an accident that Manhattan’s newest senior living facility will rise just blocks away from the gilded co-ops of Park Avenue. Their residents might live in the building someday.
Welltower Inc., the biggest U.S. senior-housing owner by market value, is seeking to push into New York, where there’s a dearth of options available for the elderly and those with cognitive issues. Last month, it teamed with luxury developer Hines to buy a site at 56th Street and Lexington Avenue, and is planning a tower to accommodate wealthy Manhattanites in need of assisted-living and memory-care services.
“You take someone who’s lived at 88th and Park their entire life and you, all of a sudden, say I’m moving you to New Canaan, Connecticut, because that’s the closest assisted-living facility I can get you into -- that is unacceptable,” Welltower Chief Executive Officer Thomas DeRosa said in an interview. “You will kill that person.”
A slowdown in the city’s luxury-condominium market -- which has dominated building and pushed up land values in recent years -- gave Toledo, Ohio-based Welltower an opening to enter Manhattan, DeRosa said. The company and Hines together paid $115 million for the two-parcel site, where they plan to erect a 15-story building. The concept they’re planning is “a little bit unproven,” said John Kim, an analyst covering real estate investment trusts with BMO Capital Markets Corp. in New York.
Like anything built in Manhattan in an era of record land prices and soaring construction costs, the price of living at the eventual tower will be exclusive. Monthly rent at the facility, which will cover the costs of a room, medical care and food, is likely to top $20,000, DeRosa said. It isn’t covered by insurance, which means residents will be paying out of pocket.
The price is competitive when compared with the combined monthly expense of hiring full-time caregivers at home and the costs of maintaining a residence in Manhattan, DeRosa said.
“There is a huge population of people that will need to live in this building
who live on Park Avenue,” he said. “This will be the reasonable alternative. These are people who will have the income. It will not be a hardship for them to pay for this.”
While there are other assisted living facilities in Manhattan -- Ventas Inc. has one on West 86th Street and Brookdale Senior Living Inc. owns one in Battery Park City -- the idea of building a ground-up project now, at a time when many New York builders struggle to make their developments profitable, “has some risk,” Kim said.
“There’s going to be a little bit of a learning curve on the demand side to see if residents are willing to pay those kinds of prices,” said Kim, who has an underperform rating on Welltower shares.
Welltower, which owns about 1,500 senior-housing and medical-office properties across the U.S., U.K. and Canada, had wanted to get a foothold in Manhattan as part of its strategy of building in markets with high barriers to entry. The company estimates that there are only 70 beds across the borough available to people with Alzheimer’s or other forms of dementia who need full-time care.
To navigate the market, the REIT joined with Houston-based Hines, which also is building a Jean Nouvel-designed luxury condo tower next to the Museum of Modern Art that has a penthouse listed at more than $70 million. The joint venture spent about six months looking for a site to buy in Manhattan, a search that included a failed bid for another lot on the Upper West Side, DeRosa said. Their main requirement was that the development be centrally located.
“It became a passion for me to find a site on this island -- and not on 93rd and First,” said DeRosa, a native New Yorker. “I want to take these people out of the shadows. I want you to see them. These are people who should be living where the vibrancy of this city congregates.”
Details for the planned facility, to rise where a TGI Friday’s restaurant now sits, are still being worked out, DeRosa said. The community will be technologically wired for “telemedicine,” allowing residents to consult with a doctor virtually without having to make a trip across town, he said. The ground floor of the building will include retail space that DeRosa hopes will be a place where residents can mingle with others who live and work in Midtown. Demolition of the TGI Friday’s building will begin next year.
“I don’t think this is a one-off,” DeRosa said of the plan. “I’m hoping this will really be an example of what can be done in all major, vibrant metro markets.”