🔒New Haven construction company finds niche converting defunct nursing homes into market rate apartments

1 of 4

Connecticut’s housing shortage is forcing developers to find creative ways to build new stock.

While the office-to-apartments trend has received a lot of attention in recent years, one Connecticut company has found a niche in another adaptive reuse market.

New Haven-based Upscale Construction was part of a development team that recently completed its first conversion of a defunct nursing home into a market rate apartment complex.

Alexandria Manor, at 55 Tunxis Ave., in Bloomfield, is the former Alexandria nursing home, which closed in 2016, before undergoing a complete renovation into a 46-unit apartment complex with an array of amenities.

Upscale Construction co-founder David Marasow said the idea for nursing home conversions came about in 2020, when he was looking for properties to redevelop.

He recalls speaking to real estate brokers who were trying to sell nursing home properties that had gone out of business, leaving them ripe for redevelopment.

Marasow and Upscale co-founder Avraham Mehl got their start in New York City, managing more than 1,200 multifamily rental units.

They moved to Connecticut in 2018 and launched Upscale because they saw the need and demand for new housing, Marasow said.

The company specializes in renovating multifamily properties, many in Hartford and New Haven, and has started to focus on nursing home adaptive reuse.

There is opportunity in Connecticut, which, like many New England states, has seen a number of nursing home closures over the years, as the industry faces numerous headwinds, including the state’s promotion of home care as a less costly alternative.

Between 1995 and January 2021, for example, 75 nursing homes with a combined 7,269 beds closed in the state, according to the Department of Social Services. There have been more closures since that time, including the 205-bed Abbott Terrace Health Center in Waterbury, which closed in October after its Medicare and Medicaid funding was recently terminated.

Last year, the 170-bed Hughes Health and Rehabilitation Center in West Hartford closed.

From the start of fiscal year 2010 through the end of fiscal 2023, New England as a whole lost a net 150 nursing home facilities, a decline of 15%, according to a Federal Reserve Bank of Boston study.

'Jump' at opportunity

The Bloomfield project is one of three such conversions so far in Upscale’s portfolio. Nearing the end of construction is the South Windsor Manor, a former nursing home that’s being turned into a 37-unit modern apartment building.

Upscale is just starting work on the conversion of an Enfield nursing home, which is expected to be completed in about six months, Marasow said.

This adaptive reuse route has several advantages, Marasow said. It typically offers buildings already equipped with infrastructure and situated in established neighborhoods, making them attractive for residential use.

However, the process is not without its hurdles. Conversions require major interior structural work to transform individual rooms into apartment layouts.

Also, renovation projects carry many unknowns, like what’s inside walls or under the roof, which can complicate a redevelopment, Marasow said.

And the smaller a building, the more complicated a conversion becomes, he said.

Buildings smaller than 20,000 square feet might only accommodate 15 new apartments, making the project less economically viable given the overhead costs and potential headaches involved.

Converted properties need to sit in areas where rents can exceed $2,000 per month to make the projects financially feasible, Marasow said.

“It doesn’t pay to convert a nursing home and get $1,000 rents,” he said.

Alexandria Manor is 50% leased after opening in June of this year, Marasow said, with the units attracting mostly young professionals.

The property contains largely one-bedroom apartments, with a small mix of studio, two- and three-bedroom units. Rents range from $2,220-$2,850, Marasow said.

The complex now has a full solar-power system, modern heat pumps and luxury amenities like a gym, private movie theater, golf simulator, business center, dog park, children’s playground and patio with barbecue stations.

While specific costs for the Bloomfield project were not disclosed, Marasow indicated that funding for such conversions typically comes from a combination of private investors and construction loans.

Victor Nolletti, executive managing director of investments for New Haven-based Institutional Property Advisors, said the conversion of nursing homes to multifamily residential has been going on for about the last 30 years, but the trend is gaining momentum given the demand for housing.

Connecticut’s apartment vacancy rate — around 3.5% — is among the lowest in the nation, and the state has an estimated need of roughly 98,000 affordable housing units.

“There’s a natural progression to it,” Nolletti said, noting another conversion was recently completed in Torrington. “The layout and infrastructure of elder care facilities often lend themselves well to residential conversions.”

Looking ahead, Marasow said he sees plenty of opportunities, including possible nursing home conversions in Hartford, New Haven and Prospect.

“You have to jump at an opportunity when it comes,” he said.