Senior Housing: United Properties’ bread and butter
by JENNIFER BJORHUS for Star Tribune
United Properties made its name in offices and industrial buildings and grabbed headlines with such major downtown projects as redeveloping the Ford Center and a new office tower being dreamed up for Nicollet Mall.
But one of the commercial developer’s most consistent moneymakers? Senior housing.
This fall, the Bloomington company, owned by the Pohlad family, will open the doors on its seventh senior co-op in the Twin Cities, a 48-unit complex in Roseville called Applewood Pointe of Roseville at Langton Lake. An eighth Applewood Pointe is in the works for south Minneapolis — two buildings with as many as 106 units on the site of the old Northrop Elementary School near Lake Nokomis. The company plans to start razing those buildings as early as this fall.
And it’s pushing deeper into senior territory. Plans are underway for its first assisted-living facility — an 80-unit complex, tentatively branded “Cherrywood,” would be located next door to the Roseville co-op under construction.
United Properties and other local developers attracted by the wave of retiring baby boomers are figuring out just how those retirees want to live their golden years. Do they want to be around other seniors or younger couples? In downtowns or suburbs? Full care or just shared amenities?
For some, senior housing is the “next big thing,” said Mary Bujold, president of Maxfield Research Inc.
United Properties says it was mainly a way to diversify their base.
United Properties veered into senior cooperatives after the 2001 recession, according to company President Frank Dutke, building its first complex, also in Roseville, in 2004. The cooperatives now account for about one-quarter of United Properties’ development work.
“It’s a steadier business than our other commercial property business,” Dutke said. “When you have to make a lifestyle change, you need to do it.”
In fact, Dutke said, the co-ops are the single most consistent business after grocery stores.
Cooperatives differ from condos in that they are owned by a nonprofit corporation holding a master mortgage. Residents buy shares of the company that appreciates at a fixed value, typically 1-2 percent a year, according to Dennis Johnson, executive vice president of St. Paul-based Cooperative Housing Resources, which arranges financing for co-ops. Residents then pay a monthly fee that covers operating expenses, taxes and debt service on the master mortgage. Most co-op mortgages are guaranteed by HUD.
Minnesota is seen as a leader in co-ops, where they’ve been unusually popular ever since the Ebenezer Society developed the state’s first, at 7500 York Av. S. in Edina, in the 1970s. According to Johnson, there’s about 95 senior co-ops around the country — 75 of them in Minnesota. Johnson said he thinks that’s because over the years Minnesota has simply created a niche of developers, lawyers and architects who know how to do them, as well as a HUD office that is particularly supportive.
“These are unusual development projects,” he said.
Although there’s some concerns about senior housing getting overbuilt, Johnson said he thinks the co-op segment is far from saturated because the total number of units out there is still quite low relative to the number of seniors.
United Properties said 38 of the 48 units in the new Roseville co-op are sold; it has reservations set for about two-thirds of the project planned near Lake Nokomis.
United Properties’ brand, Applewood Pointe, targets a midmarket crowd with two-bedroom units ranging from $200,000 to $300,000 and common areas including fitness centers and craft rooms.
Buyers are typically in their 70s and finance the move by selling their own homes, Dutke said. The bleak housing market has posed some challenges but Dutke said only a small number of prospective owners hasn’t been able to make the move. The company also offers bridge loans to help seniors move in until their homes sell.
The bigger challenge, he said, is meeting the tenants’ high standards — no misaligned drapes or scratches — once they do.
“The customer is there full time, every day, and they don’t have a lot else to do,” he noted.