At Mainstay Financial, we spend a great deal of time thinking about how acquisition basis, capital investment, operations, and resident experience work together. A recent stay at a restored bed-and-breakfast in Hendersonville, North Carolina, gave me an unexpected way to think about that relationship and the opportunity represented by existing senior housing communities serving the middle market.
Vicki and I recently spent a weekend at Pinebrook Manor, a restored bed-and-breakfast in Hendersonville, North Carolina. I expected a pleasant weekend away. I did not expect to come home thinking differently about senior housing.
Pinebrook is an older home on five acres, carefully restored and operated by Graham and Melanie MacPherson. It does not compete with a luxury hotel by trying to imitate one. There is no enormous lobby or dramatic arrival sequence designed primarily to create a first impression. What it offers instead is a collection of smaller experiences that accumulate: well-kept grounds, comfortable rooms, music playing quietly through the house, thoughtful furnishings, coffee and tea available throughout the day, wine in the afternoon, and a breakfast prepared with obvious care.
Graham and Melanie were both present throughout our stay, spending time with guests, answering questions, offering guidance, and paying attention to the small things that make a stay memorable. During one of my conversations with Graham, he reduced the bed-and-breakfast business to something wonderfully simple.
A bed-and-breakfast, he said, has to get two things right: the bed and the breakfast.
There is wisdom in the simplicity.
A conventional hotel and a bed-and-breakfast are both selling lodging, yet they often create value in very different ways. A hotel may devote substantial capital to the porte-cochère, lobby, front desk, elevators, corridors, meeting rooms, fitness center, restaurants, and other public spaces. Those investments create scale, consistency, and brand presence. They can also create an impressive first impression.
A good bed-and-breakfast allocates its resources differently. The building may be older. The public spaces may be smaller. There may be fewer amenities in the traditional sense. Yet the investment is concentrated much closer to the guest: the bed, the food, the surroundings, the music, the furnishings, and the personal interaction with the people providing the service.
Does attainable middle-market senior housing really need to be a less expensive version of Class A senior living, or should it be designed around a different value proposition altogether?
The Cost of Amenity Density
Much of senior housing has spent the last two decades competing through what might be called amenity density.
New communities are often differentiated by the number and scale of their shared spaces. Multiple dining venues, theaters, salons, pubs, fitness centers, demonstration kitchens, private dining rooms, art studios, and landscaped courtyards have become common features in upper-end senior living.
There is nothing inherently wrong with this model. Many older adults want those environments, and well-executed Class A communities can provide an exceptional living experience.
The challenge is economic.
Every square foot must be purchased or developed, financed, heated, cooled, maintained, insured, and eventually replaced. Common spaces that impress prospective residents during a tour still have to be supported economically after move-in. As construction costs, labor costs, insurance, interest rates, and operating expenses rise, the amount of rent required to support the physical plant rises with them.
This creates an increasingly difficult equation for the middle market.
The question is not simply how to build the same product more cheaply. It may be whether the product itself should change.
A bed-and-breakfast offers a useful analogy because it demonstrates that a smaller capital footprint does not necessarily produce an inferior experience. Under the right circumstances, the opposite may be true. By directing resources toward the elements guests use most frequently, a smaller property can sometimes deliver more intimacy, familiarity, and care than a larger and more expensive alternative.
Senior housing may have a similar opportunity.
From Amenity Density to Hospitality Density
The phrase I kept coming back to during the weekend was hospitality density.
Amenity density asks how many spaces a community offers. Hospitality density asks how many moments during a resident's day communicate care.
Does someone greet the resident by name in the morning? Is the coffee good? Is music playing that residents actually enjoy? Does someone notice when a resident who normally comes to breakfast does not appear?
None of those experiences necessarily requires a large capital budget. They require attentiveness.
This does not mean the physical building is unimportant. In value-add senior housing, the opposite is true. Roofs, HVAC systems, plumbing, electrical systems, life-safety infrastructure, accessibility, and deferred maintenance must be addressed first. Hospitality cannot compensate for a building that does not function reliably.
But after the physical plant is stabilized, the allocation question becomes much more interesting: Where does the next dollar create the most value for the resident?
Sometimes the answer is the kitchen. Sometimes it is lighting. Sometimes it is replacing worn flooring, improving landscaping, refreshing furniture, or turning an institutional-looking dining room into something more residential. Sometimes it is simply better coffee.
None of those decisions is particularly dramatic in isolation. Collectively, however, they determine whether a community feels managed or cared for.
Why Existing Buildings May Matter More Than We Think
This is one reason I continue to believe existing senior housing communities can play an important role in addressing the middle-market affordability problem.
New construction will remain necessary. Demographics alone will require additional inventory in many markets. But the economics of creating new Class A inventory make it difficult to reach much of the middle market.
Existing communities create another possibility.
When an appropriately located property can be acquired at a materially lower basis than replacement cost, capital can be redirected. Rather than carrying the economic burden of expensive land, lengthy entitlement, new construction, and large amenity packages, ownership can invest selectively in the existing physical plant and then concentrate on the elements residents experience every day.
This is not an argument for buying old buildings simply because they are inexpensive. A successful repositioning still begins with the market.
The demographics have to support the community. The psychographics have to support the product. There has to be sufficient labor, access to healthcare, and enough economic strength in the surrounding area to sustain the operation. Competitive supply, referral patterns, local housing dynamics, and the preferences of the older adults who actually live in the market all matter.
The building itself also has to be capable of improvement. Some assets are obsolete. Some have layouts that cannot be repaired economically. Some sit in markets where no amount of renovation will create demand.
But when the location, building, and local market align, an existing community can provide something difficult to replicate with new construction: a lower cost basis combined with the ability to create a highly personal environment.
The objective is not to make an older building look new. It is to create a better resident experience inside an economically sustainable building.
Food Is Not an Amenity
Dining may be the clearest example of where senior housing language can obscure resident reality.
We often refer to dining as an amenity. Residents experience it three times a day.
Meals establish rhythm. They create anticipation. They provide social interaction. They stimulate memory. They are among the most frequent opportunities a community has to either reinforce or diminish the resident experience.
The answer is not necessarily expensive ingredients or elaborate menus. Freshness matters. Presentation matters. Consistency matters. Familiarity matters. Choice matters.
Most importantly, the food should reflect the residents.
One of the benefits of operating multiple communities is the ability to create purchasing efficiencies and operating systems while still adapting menus to the people living in each building. Standardization should make execution easier. It should not eliminate local preference.
Graham's simple observation about the bed and the breakfast stayed with me because Pinebrook demonstrated the point so well. The breakfast was memorable not because it was extravagant, but because someone had clearly thought about preparing and presenting it.
This is an important distinction for senior housing. The resident does not experience the food budget. The resident experiences the meal.
Flexible Space Can Be More Valuable Than More Space
I have become increasingly skeptical of senior housing floor plans that assign a separate room to every conceivable activity.
There is the theater. The chapel. The art room. The private dining room. The activity room. The library. Some are used frequently. Others may sit empty much of the week while residents gather somewhere else.
Many older adults I have spoken with prefer something simpler: comfortable, flexible spaces where life naturally occurs.
One older adult I know particularly well could afford almost any senior living community she wanted. Yet her preference would be a smaller, one-story community with shorter distances, modest residential rooms, and active multipurpose gathering spaces. She does not particularly want to walk past five empty amenity rooms to find the one place where everyone is spending time. She wants to know where the people are, and there is something worth listening to in that preference.
A flexible common room can host morning coffee, an afternoon program, music before dinner, a family celebration, or a worship service. Residents can watch the space change and participate in those changes.
The space stays alive because its purpose is not fixed. This is another form of capital efficiency: the goal is not simply reducing square footage, but increasing the usefulness of every square foot that exists.
Designing for the Senses
The sensory environment deserves more attention in senior housing as well.
Pinebrook Manor was a good reminder of how much of hospitality happens below the level of conscious analysis. Music was present without being intrusive. The grounds were visually cared for. Breakfast could be smelled before it was served. Flowers, linens, lighting, and furnishings contributed to the experience without any single element becoming the centerpiece.
Senior living communities can do the same.
Music does not require an elaborate building-wide entertainment system. Modern connected speakers make it relatively inexpensive to create different musical environments throughout a community. More important than the equipment is the selection. The music should reflect the people living there rather than the preferences of whoever happens to control the playlist.
Scent should also be intentional, but not artificial. Research has long demonstrated the unusually close relationship between olfaction, memory, and emotion. The objective is not to perfume a building. It is to create natural sensory cues: coffee brewing, food being prepared, flowers, clean linens, and other familiar scents that communicate home and activity.
Technology should follow the same philosophy. Digital displays can connect residents to weather, local news, community events, birthdays, and activities, but technology should support the environment rather than dominate it. The best technology often disappears into the experience.
Renovation as Participation
One of the less obvious advantages of repositioning an existing senior housing community is that residents can participate in the process.
Renovation is usually discussed as something happening to residents. It can also happen with them.
What should this room become? What colors do you prefer? What music should we play? What meals do you remember? What would make this area more comfortable?
Those questions seem small, but they give residents agency in an environment where older adults too often experience decisions being made on their behalf.
A renovation project can therefore become part of the community experience itself. Residents can watch something change, participate in the choices, and anticipate what comes next. The work becomes more than construction; it becomes a form of ownership and participation.
Places Need Stories
Historic inns also understand something senior living sometimes forgets: people are interested in the story of a place.
Who built this house? Who lived here? What happened here? Why was it preserved?
Those stories give a building identity.
Senior living communities need identity too. Not simply a brand promise or a mission statement developed in a corporate office, but an authentic relationship to the surrounding community.
Older adults are not withdrawing from the world simply because they move into senior housing. The community should help them remain part of it. A successful senior living property should feel less like an isolated campus and more like an extension of the place where residents already belong.
A Different Definition of Luxury
Perhaps the larger lesson from Pinebrook Manor is that we have defined luxury too narrowly.
Luxury can mean marble, square footage, architectural drama, multiple dining venues, and an extensive list of amenities. There is a market for that definition.
But luxury can also mean someone knows how you take your coffee. Someone remembers the music you like. Someone notices when you have not come to breakfast. Someone knows your daughter is visiting this weekend. Someone recognizes when you are having a difficult day.
The first definition depends heavily on capital; the second depends heavily on culture.
This does not make one inherently better than the other. But it does suggest that middle-market senior housing does not need to compete by replicating the physical characteristics of Class A communities at a lower price.
A smaller, older community may never out-amenitize a newly constructed luxury property, but it can compete through familiarity, personalization, and a culture in which residents are genuinely known.
If the building has been acquired at the right basis, improved thoughtfully, and operated efficiently, it may also be able to deliver those experiences at a monthly cost accessible to a much broader group of older adults.
This is what made our weekend at Pinebrook Manor more than a pleasant trip. It gave physical form to an idea I have been thinking about for some time: hospitality is not ultimately created by buildings. Buildings create the stage on which hospitality happens.
For those of us thinking seriously about the middle-market senior housing challenge, this distinction matters. We may not solve affordability by finding a way to build the same increasingly expensive product for less.
We may solve part of it by reconsidering what residents actually value, buying existing assets where the economics make sense, investing heavily in the fundamentals, and then allocating capital toward the moments that make people feel comfortable, relevant, and known.
Perhaps the future of middle-market senior housing is not a cheaper version of luxury senior living.
Perhaps it is a different kind of luxury altogether: the luxury of being known.
Sources and Further Reading
Pinebrook Manor, Hendersonville, North Carolina. Property history, amenities, and guest commentary.
National Investment Center for Seniors Housing & Care (NIC). Research and analysis regarding the middle-market senior housing challenge, industry supply and demand, and senior housing economics.
Harvard Joint Center for Housing Studies. Research regarding housing affordability, aging households, and the financial circumstances of older Americans.
U.S. Administration for Community Living. Demographic and economic information related to older adults in the United States.
Research literature on olfaction and autobiographical memory. Research examining the relationship between scent, memory, and emotion.
This article reflects the author's observations and perspectives on senior housing operations, investment, and development. It is provided for informational purposes only and does not constitute investment advice or a recommendation regarding any specific investment.
About the Author
Tod Petty is Chief Investment Officer at Mainstay Financial and Mainstay Senior Living. Over more than 20 years in senior housing and healthcare real estate, he has served as a President, COO, CEO, and investment executive. His perspective has been shaped by both sides of the business: evaluating investments at the capital table and operating communities where strategy ultimately succeeds or fails.
Originally published in Senior Housing Unfiltered on LinkedIn.
