Harrison Street Buys Seniors Housing Portfolio for $520M
- Aug 21, 2014
Harrison Street Real Estate Capital has completed the $520 million acquisition of a seniors housing portfolio of 11 properties located in the Northeast, the company announced on Wednesday. The properties are in metro Baltimore; metro Boston; Philadelphia; Staunton, Va.; and Newport, R.I.
The seller was a joint venture of The Shelter Group and its Brightview Senior Living affiliate, a Harrison Street spokesperson told Commercial Property Executive.
This transaction also marks the start of a joint venture with The Shelter Group, which, through Brightview, will continue to operate these properties. Brightview, which is based in Baltimore, developed nine of these communities and currently operates each of them.
“This investment complements our existing portfolio and highlights our firm’s various cost of capital products, which creates excellent opportunities for our LPs,” Christopher Merrill, Harrison Street’s co-founder, president & CEO, said in a release.
The 11 assets comprise 1,600 units, half of which are independent living, with the balance dedicated to assisted-living and memory-care residents. The communities average 12 years of age; their locations, physical plants and amenity packages are reportedly among the best in their respective markets.
“The cross-section of exemplary operations, thoughtfully designed Class-A assets, reputation and strong and strategic submarkets are perfectly aligned with HSRE’s senior housing strategy. Brightview is going to be … an important component of our senior housing growth strategy for years to come,” Michael Gordon, a Harrison Street principal and head of the company’s Transaction Group, said in the same release.
Harrison Street acquired the portfolio on behalf of Harrison Street Core Property Partners L.P., its $2 billion open-end fund, and Harrison Street Real Estate Partners IV L.P., a $750 million discretionary, closed-end fund. Given the properties’ varying risk profiles and unique characteristics, HSRE allocated each asset to its appropriate fund.
The former is the firm’s open-end core fund that focuses on stabilized income-producing properties; eight of the properties, with a blended occupancy of 96 percent plus, were purchased through this vehicle. The latter is the firm’s opportunistic fund. It purchased the remaining three communities, which average 82 percent occupancy and have been undergoing significant capital programs and repositioning initiatives.
Brightview also made a significant equity investment in the joint venture.
The Brightview communities continue Harrison Street’s strategy of focusing on private-pay rental properties that serve independent-living, assisted-living and memory-care residents and allow residents to age in place. Each is situated in a strategic submarket with advantageous supply-demand dynamics, high barriers to entry and strong demographics.
The portfolio was financed through multiple sources, including PNC, Fannie Mae, Synovus Bank and GE Capital. The largest component of the portfolio financing came in the form of newly originated Fannie Mae debt, which carries a 10-year term and a 3.69 percent interest-only rate.