A former geriatric nurse aims to develop a $110 million high-rise for seniors in Honolulu but is seeking an initial group of buyers to help pay for the land.
Paradise Retirement Hawaii LLC, led by Christian Sieber, plans to build a 125-unit tower across from the Hawai‘i Convention Center and renovate a nearby 40-unit low-rise as an integrated luxury continuing-care retirement complex for people age 60 or older.
The project is one of a growing number in Hawaii where a high percentage of older people has made for a strong market for retirement communities providing hotel-like amenities and care services that can include meals, housekeeping, transportation, activities and skilled nursing.
Paradise Retirement is pursuing an unusual financing model by asking future residents to invest before the land has been bought or money secured for construction.
The company wants to raise $12 million to $15 million from an initial 20 investor/residents as part of a "VIP Founders Club," Sieber said.
Paradise Retirement is targeting seniors with at least $150,000 in net income or assets of $2 million, and is offering incentives that include a discount on unit prices and a two-week cruise to Tahiti.
A direct mail advertisement soliciting investor/residents is being sent to roughly 14,000 consumers.
Prices for Paradise Retirement range from $400,000 to $1.3 million for an entry fee, which is partially refundable if a resident moves out or dies, plus monthly service fees averaging $3,900.
Senior-living communities can be structured in a variety of occupancy formats — such as fee-simple unit ownership (One Kalakaua Senior Living is an example), rentals (The Plaza at Punchbowl is an example), partially refundable entry fee (Kahala Nui is an example) and nonrefundable entry fee (15 Craigside is an example).
In this respect, Paradise Retirement isn’t uncommon. But its financing model is.
Steve Ordahl, senior vice president of business and fund development for Ecumen, a Minnesota-based nonprofit that owns or operates about 70 senior-living communities on the mainland, said Paradise Retirement is employing an unconventional — though not untoward — strategy with its VIP investment offer.
"It’s a little unusual but not off-the-charts unusual," he said.
Ordahl recommends that anyone considering such an offer do serious research about how their money may be used as well as who will finance the rest of the project and under what conditions.
If Paradise Retirement were a condominium, the project would have to comply with state Real Estate Commission disclosure requirements. But entry-fee based senior-living projects aren’t regulated by the commission.
Sieber said only some of the money raised from VIP founder residents will be used to buy the land for the project, though he declined to specify the amount. He said private investors will provide the balance.
On Paradise Retirement’s website it says VIP investor money will be secured by real estate after the land purchase is confirmed but before construction financing is secured.
Sieber said he expects it will take two or three months to receive construction financing after land acquisition.
Typically, lenders for senior-living projects won’t loan money to a developer until 70 percent of a project’s units are sold in advance. Such a sale involves a prospective buyer making a refundable down payment.
Paradise Retirement plans to begin advance sales next month, requiring a 25 percent refundable down payment on entry fees. But Sieber said he has lender commitments to finance construction without them. He said it wasn’t appropriate to identify the lenders.
Paradise Retirement is working with real estate brokerage firm Kahala Associates on sales.
California-based Integral Senior Living has signed on to manage Paradise Retirement. The firm is the 17th-largest senior housing operator in the nation, managing 50 projects in 10 states, according to the Assisted Living Federation of America.
If financing proceeds as planned, tower construction is slated to start in mid-2013 and be complete in 2015.
The tower is designed to be 23 stories on a parcel at 508 Atkinson Drive. Two low-rise apartment buildings at 1868 and 1880 Kahakai Drive, about two blocks away, comprise a smaller piece of Paradise Retirement and would be renovated.
"It’ll be a place where you want to retire, not a place where you put your parents," said David Doherty, director of sales for Paradise Retirement.
Doherty, who was director of sales and marketing at One Kalakaua Senior Living and held other management positions at several senior-living communities on the mainland, including La Jolla Village Towers at Vi in San Diego, said he joined Paradise Retirement because of Sieber’s idea to offer a full range of care in a standard residence.
"It’s a visionary project," Doherty said.
Sieber’s plan calls for the Kahakai apartments to eventually be used as an assisted-living and memory care facility. Most residents will never need to move to the Kahakai apartments because they can get skilled-nursing in their independent-living units if necessary, according to Sieber’s plan. Not moving residents, the developer said, is proven to extend the lives of seniors.
Sieber said he formed his plans from experiences working as a geriatric nurse in Germany for eight years. Sieber also has operated vacation rentals on the east side of Hawaii island, and started Nanea Care, a home-care business.
Sieber lives on Hawaii island and hopes to develop a series of senior-living projects in Hawaii, including one in Kailua-Kona.
