There is no question that we at National Church Residences are passionately committed to preserving affordable seniors housing. We developed this commitment and focus despite bumps in the road and lessons learned the hard way. Over the last 10 years, the real question has been: How do we do preservation with excellence? Our experiences have transformed my job and shaped our organization. The compelling need for preservation is clear. Just do the math. If you just build new affordable housing properties when the money is available and don’t preserve the existing stock, you will tread water at best. Today, it can easily take three years to develop a new 50- to 75-unit building. Many older affordable senior communities are larger—between 150 to 300 units. It takes three to four new buildings and many years to replace just one older existing building.
Years ago, National Church Residences did preservation from time to time. But in 1999, we purchased our first community in Atlanta: Lakewood Christian Manor. Though we had many challenges along the way, the community commitment, the residents’ appreciation, and the transformative rehab were compelling. We realized National Church Residences should do more of this.
That commitment expanded when we purchased and preserved four small senior buildings in North Carolina in 2004. Our organizational mind-set changed, and we started a major board-driven initiative that retooled our Development and Construction department to be more proactive in looking for acquisition opportunities focused on preservation.
We have had our share of stumbles and things we would do different. But it made us better at preservation. Here are some lessons we’ve learned.
Lesson 1: The amount of rehab that we would have done 10 years ago was much less extensive than what we do today. Preserving a building with a conservative rehab budget doesn’t get you to the end zone. It may lead to a quicker execution, but it is critical to stay the course and you need to do a thorough job. We know this, and the investors agree.
We learned this the hard way. For example, in a rehab of an historic hotel, we didn’t realize that we actually needed to redo the entire plumbing system. Once the rehab was completed, we still were faced with the bad plumbing. Shortly after, when we acquired another historic hotel just two blocks away, we did significant additional due diligence and rehab.
National Church Residences has been in a leadership role in this push for more thorough rehab in preservation projects. We are happy to see that higher rehab requirements are now industry standard for developers, lenders, investors, and state finance agencies alike.
Lesson 2: You have to be careful how much you are willing to pay for a property. You have to be able to say “no” no matter how much you want that building. If you pay too much for the property, it is likely you will pay too little for rehab. That means National Church Residences walks away from eight to nine out of every 10 opportunities to purchase properties. We simply are not willing to pay as much for the property as others because our demand for rehab is higher.
Lesson 3: We are at our best when we are partnering with an owner for the long haul and our missions align. We tend to purchase from not-for-profits like ourselves. The unity of mission often results in a collaborative ability to be patient for the long-term planning and to do things in the best interest of residents already living in the building.
A good example took place in Sandusky, Ohio. The Kiwanis Club had developed, owned, and operated two seniors Department of Housing and Urban Development (HUD) Sec. 202 projects, which were 40 and 30 years old. The club leaders were deeply committed to preserving these community assets. The properties were built directly on Sandusky Bay next to a yacht club. The owners declined numerous offers to purchase and convert the properties to other uses, and they were very patient as we spent several years trying to get tax credits for the rehab. It was a true partnership.
Another example of a patient sale with a mission-oriented owner was Baptist Towers in Atlanta. This was National Church Residences’ third acquisition over a 10-year period in Atlanta. All three were owned by nonprofits. Each time, we worked with the owner on a long-term strategy to ensure the building was preserved correctly. We talked to Baptist Towers’ owners over a three-year period before we finalized the deal. “Patient, mission-driven acquisitions” are one of our core strengths.
Lesson 4: We stay true to ourselves. When we evaluate a deal, we look for affordable seniors housing because that is most of our portfolio. We try not to diversify too much in a way that would dilute our expertise. This is important not just for the development perspective, but also for our property management team. National Church Residences most commonly renovates properties from the HUD Sec. 202 program and the HUD seniors-designated Sec. 236 program.
Lesson 5: We look for purpose-driven preservation. Recently we began looking at seniors housing preservation with an additional filter—how can we preserve the building, the great location, the rental assistance as well as address the critical aging-in-place issues as well? One way is to convert three HUD Sec. 202 buildings in Ohio to a mix of independent affordable housing and affordable assisted living. It has been a very exciting collaboration between HUD and the state of Ohio.
There’s something very rewarding about preserving the homes of people already living in the building. Some residents have lived in these buildings for 25 years or more and are in their 80s and 90s. When they say, “Thank you for what you have done for my home,” you know you have had a great day at work. That’s why we love our preservation work here. We are committed to creating excellence that transforms lives. Michelle Norris is senior vice president of development and public policy at National Church Residences. Headquartered in Columbus, Ohio, National Church Residences is the nation’s largest nonprofit owner and manager of affordable senior housing. The firm has 330-plus communities in 28 states and Puerto Rico, including seven Ohio-based senior health care communities. For more information, visit the firm’s website at www.nationalchurchresidences.org.