North County Housing Boom: A Lucrative Shade of Gray

In the beginning of the North County boom years, the zeal was for commercial projects, and shopping centers soon lined the major streets.

Then office space became attractive, and gleaming glass-and-steel buildings bloomed in former flower fields.

Now much of the smart money has turned to yet another lucrative investment opportunity in North County, the senior citizen housing market, and venture capitalists have responded with glee.

Sometimes lost amid the area’s youthful image with its overflowing elementary schools and beaches packed with sleek, young bodies, is the fact that North County has an elderly population that exceeds the national average in both size and income. Senior business is big business.

Unprecedented Rise in Housing for Elderly

Along with its boom in overall residential construction, North County is also seeing an unprecedented increase in housing projects for all segments of the elderly population, particularly the more affluent elderly who are not dependent on Medicare or Medi-Cal.

Projects are being financed by local partnerships and lending institutions, nationwide chains and foreign investment lured by the weak dollar.

“Basically, we have runaway construction of senior housing in North County,” said Joe Diaz, regional director of the California Assn. of Health Facilities.

“North County is ideal for seniors,” he said. “Land is not as expensive as in the mid-city of San Diego, the weather is perfect, and it’s close to the ocean. Builders and investors see it as ripe.”

Even in slow-growth cities, where the rumor of a new subdivision breeds immediate opposition, politicians are loathe to turn down a proposal for a new convalescent hospital, “assisted-living” complex or seniors-only condominium project.

“Senior housing is the hardest to turn down,” said one developer. Seniors have political clout--although proposed projects in Solana Beach and Rancho Bernardo have encountered recent opposition.

Investors are eager to supply upscale housing for the three major segments of the elderly market, which Diaz defines as “no-go, slow-go and go-go.”

“The no-go has medical problems and needs 24-hour nursing care, the slow-go needs some assistance but is basically independent, and the go-go is out on the golf course and at the country club,” said Diaz.

In a geographic arc stretching from Rancho Santa Fe to Oceanside to Escondido, Rancho Bernardo and Poway, the rush is on to provide every level of no-go, slow-go and go-go housing, both rental and owner-occupied.

In January, 1985, housing projects geared to seniors accounted for 2,000 beds in North County, according to Diaz. Today, the figure is 5,500, with 1,200 set to be completed in the next six months, and no end in sight.

Legislation Helped

One reason for the boom is legislation sponsored by Gov. George Deukmejian that essentially deregulated the construction of nursing homes in California.

Under Gov. Edmund G. Brown Jr., the state tried to keep down the cost of medical care to the elderly by restricting the number of nursing homes through a “certificate of need” system where would-be operators had to justify that a new home was needed. Deukmejian hopes to keep down costs through a free-market approach.

Diaz, who was director of the Office of Statewide Planning and Development in the Brown Administration, sees dark clouds on the senior housing horizon: Overbuilding, lack of nurses, inadequate state and federal support, and escalating prices.

“North County is going through what East County went through 20 years ago, when you couldn’t build nursing homes fast enough,” Diaz said.

The problems that Diaz warns about, however, are tomorrow’s concerns. For today, the market is hot, and the competition for the senior dollar is intense.

Each Boasts Uniqueness

Each project boasts that it offers something different, something unique.

“We sell a life style, we don’t just sell real estate,” said David Steel, vice president/regional project development manager for Missouri-based Retirement Centers of America Inc., a subsidiary of Avon.

Steel’s firm, which has its regional office in Rancho Bernardo, is building the $50 million, 320-unit Casa de las Campanas off Interstate 15 near Lake Hodges.

It offers the “lifecare” concept, a full menu of health, entertainment and social services, for rental prices from $2,000 to $4,000 a month. Cost is determined by the size of the living unit, the age of the tenants and the level of service.

At Casa Palmera Care Center in the San Dieguito River Valley near Rancho Santa Fe, patients are provided with a beauty salon and meals prepared by a former Gustav Anders chef, as well as medical attention.

Opened in June

The 99-bed center opened in June and caters both to the aged and to the Rancho Santa Fe resident who prefers a day or two of pampering before returning home from a bit of plastic surgery.

“We’re trying to provide an alternative for people who want to live well in their mature years,” said owner-operator Lee Johnson.

It is no wonder that the American Society of Aging selected San Diego for its March 18-19 national convention--”Housing the Older Market: Creating a New Agenda”--co-sponsored by the American Assn. of Homes for the Aging, American Assn. of Retired Persons, and the National Assn. for Senior Living Industries.

Nationwide, senior housing is a growth industry. Twelve percent of the population is 65 or older, a figure expected to grow as post-World War II baby boomers turn gray.

Although exact figures are closely guarded secrets among competitors in the housing and medical care industries, some marketing studies suggest that North County’s senior population exceeds the national average both in size and income by a third or more. Of such figures are investment opportunities born.

In ‘Thought’ Stages

“There are a lot of projects in the ‘thought’ stages in North County,” said Steel of Retirement Centers of America. “It’s not as crowded as the mid-city or as warm as East County. It gives seniors a sense of security they want. The market may reach saturation in five to 10 years, but right now it’s wide open.”

Retirement Centers of America plans an Oceanside project in partnership with a nonprofit group from St. Peter’s Episcopal Church of Del Mar. It also has plans for a seniors complex exclusively for retired military officers, possibly within reach of Camp Pendleton.

Both approaches--involvement with a nonprofit group and mining the military market--have been used successfully elsewhere in North County.

In Encinitas, the San Diego Hebrew Home is building a 96-bed retirement home with a 120-bed nursing home attached. Called Seacrest Village, the project is slated to open by early next year.

“We’re following the community we serve, and our community is moving to North County,” said Michael Ellentuck, executive director of the San Diego Hebrew Home.

When it opened its swank Chateau Lake San Marcos, San Diego-based Income Property Group, possibly the most successful of local investment groups involved in the North County senior housing market, advertised in magazines devoted to retired military officers. The response was swift and enthusiastic.

The country club-looking project offers golf, tennis, fishing and boating. One- and two-bedroom attached units sell from $100,000 to $170,000, with a monthly fee of $600 to $700, which includes meals. A nursing home will soon be added.

“Things run in cycles,” explained Daniel A. Moriarty, a Solana Beach resident and one of four Income Property Group partners. “We were in shopping centers but we saw the downturn there. We went into office buildings and now there’s a glut.

“We could see that the North County was where the action was so our game plan involved that arc from Carlsbad to the Tri-City area to Escondido and Rancho Bernardo.”

The partnership, which has done joint ventures with Great American First Savings Bank, owns Rancho Bernardo Convalescent Hospital in Poway, Casa Del Norte Convalescent in Escondido, Santa Fe Convalescent in Encinitas, Las Villas de Carlsbad, and Las Villas Del Norte in Escondido.

Rents Start at $850

Las Villas de Carlsbad, for example, is for seniors in the slow-go to go-go group. Studios (336 square feet) rent from $850 to $1,300 a month, one-bedroom (476 square feet) from $1,425 to $1,900, and a two-bedroom (812 square feet) from $2,275 to $3,200.

Included in the monthly rate are meals, 24-hour assistance, transportation, housekeeping and linen service, and a range of social activities.

Part of IPG’s success, Moriarty said, comes from knowing how to run senior housing, as well as how to build it. A brochure given to prospective investors shows IPG gross revenue at more than $16 million in 1986, up from $3 million in 1982.

“We’ve been out in front because we got there first,” Moriarty said. “We’d like to stay there. The older generation is a tough market. They tell you right up front if they don’t like something. They have no inhibitions in demanding service.”

Like Diaz, Moriarty sees potential problems ahead in the senior housing market. Not all projects will be money makers, he warns. Income Property Group has only one more announced project.

“Government control isn’t the answer, but neither is total deregulation,” he said. “Look at Arizona, which has no control. There are too many beds and people are failing. A lot of people are going to get hurt here (in California) in the meantime before we find a solution.”

John Jason, general partner/executive vice president of Costa Mesa-based American Retirement Villas, agrees that the sure-thing days may soon be over. His firm is finishing its second seniors-condo project at El Camino Real and Santa Fe Drive in Encinitas.

“We’re in the Chevrolet-Oldsmobile segment of the market, not the Cadillac part,” Jason said. “The ambulatory market has been red-hot in North County for several years. It will cool down I’m sure, but good operators will still make a profit.

“Right now, there is no shortage of investment money for North County.”