NATIONAL CITY, CA—Extensive capital investment is taking place to make senior-apartment communities more livable and enjoyable for residents, but the cost must be reflected in higher rents, putting a burden on many residents, SVN's Peter Valleau tells GlobeSt.com. Valleau and Roberto Candel of SVN recently represented buyer Southern Highland Partners in acquiring Southern Highlands, a 151-unit senior-apartment complex at 2525 Highland Ave. here, from seller M&L Financial for $14.9 million. The seller was represented by David Cameron and Joe Ramos of South Coast Commercial. We spoke exclusively with Valleau about the National City senior-housing market and what investors are looking for in this sector.

GlobeSt.com: How would you characterize the senior-housing market in National City as compared to other parts of San Diego?

Valleau: The current seniors independent-living market is exceptionally strong both in the South Bay and in San Diego County as a whole. Upon closing, Southern Highlands had one vacancy, less than 1%. Our analysis of similar senior properties indicated a vacancy rate overall of less than 2%.

GlobeSt.com:  What are the latest trends you're noticing in this sector?

Valleau: The latest trends in senior housing include increasing amenities for the residents. Extensive capital investment is taking place to make the communities more livable and enjoyable for the residents. Unfortunately, this cost must be reflected in higher rents, which is putting a burden on many residents. Our plan with Southern Highlands is to make cost-effective improvements while maintaining an affordable rent structure. 

GlobeSt.com: What are senior-housing investors looking for in the properties they buy?

Valleau: Investors in independent senior housing aren't much different than conventional apartment investors. They are looking for potential rent growth, value-add opportunities and stability. Some investors favor higher-quality assets and buildings and are willing to forgo some yield, while others are looking for properties that provide a maximum return in a given market.

GlobeSt.com: What else should our readers know about the senior-housing sector?

Valleau: The real crunch in senior housing is occurring in the affordable, but not subsidized, segment of the market. Cost of new construction, especially in premium markets like California, is too high to economically provide moderate or affordable units that are not subsidized. Developing and building subsidized units is a specialized market niche, which incurs multitudes of additional construction, political, regulatory and time costs. This in turn makes subsidized affordable housing units excessively costly.