Pru Nets $568M in Capital for Seniors-Housing Fund

Prudential Real Estate Investors is set to make a big impression in the seniors-housing sector, having raised $568 million for its newest and largest seniors-housing fund.

By Gail Kalinoski, Contributing Editor

Noah Levy

Prudential Real Estate Investors is set to make a big impression in the seniors-housing sector, having raised $568 million for its newest and largest seniors-housing fund.

Senior Housing Partners IV, a closed-end fund, will target investments in seniors housing, including independent-living, assisted-living and memory-care properties, as well as other assets that offer a combination of those services. The fund will invest in direct and joint venture acquisitions of existing properties, forward commitments on newly constructed projects, including mezzanine loans, and development.

The fund’s first asset was purchased in October, but PREI declined to release transaction details.

“We look at projects all around the country, but tend to focus on the top MSAs,” Noah Levy, managing director with PREI and the fund portfolio manager, told Commercial Property Executive. “Most of our acquisitions will be existing communities, but the fund does have a limited appetite for new development.”

Levy cited the growing need and demand for high-quality senior housing in the United States.

“We expect this demand will continue to increase and we look forward to providing an attractive return for our investors over the long-term,” Levy said.

PREI opened its first senior housing fund, Senior Housing Partners I, in 1998, when it noticed the growing market opportunity as well as investor interest. Senior Housing Partners II opened in 2001 and Senior Housing Partners III opened in 2006.

“Both SHP I and SHP II are completely liquidated,” Levy noted. “SHP III’s investment period is up.”

Steve Blazejewski, who has a strong background in the senior housing industry, was hired as a principal to help the team expand the group’s capabilities. Blazejewski was previously a vice president of senior housing at Health Care REIT and a vice president with CSH, L.L.C., an affiliate of The Carlyle Group. A graduate of the U.S. Naval Academy, he also has an MBA from the University of Maryland, Robert H. Smith School of Business. Blazejewski will be based in Atlanta and report to John Dark, PREI’s managing director of senior housing.

“Steve brings the kind of experience and industry knowledge that will help PREI to identify and target the types of senior housing opportunities that will expand our ability to execute on behalf of our clients,” Dark said.

As of Dec. 31, 2011, PREI managed approximately $49.1 billion in gross real estate assets on behalf of nearly 500 clients worldwide. It did not break out senior housing assets. Based in Parsippany, N.J., PREI has public and private investment vehicles in the U.S., Europe, the Middle East, Asia, Australia and Latin America.

PREI seems to be ramping up its seniors-housing investments at the right time. The market continued its recovery in the fourth quarter of 2011, according to a report by NIC MAP. The average occupancy rate for seniors-housing properties in 4Q11 was 88.2 percent, an increase of 0.1 percentage points from the previous quarter and a 0.7 percentage point increase from 2010, the report stated.  The seniors housing rate had risen for seven consecutive quarters. NIC MAP noted that independent living facilities, in particular, were driving the recovery. The assisted living properties occupancy rate remained at 88.6 percent for 4Q11. However, the nursing-care occupancy rate of 88.2 percent in the fourth quarter was down slightly from the third quarter. The report noted that nursing-care occupancy “has been marginally declining for several years.”

Overall, the annual absorption rate for senior housing properties was 2.0 percent in the fourth quarter of 2011, compared to 1.9 percent in the third quarter and 1.7 percent in 4Q10 , according to the NIC MAP report.