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$569 Million Florida Portfolio Sale Underscores Keen Investor Appetite for Seniors Housing

Senior Housing Market Remains Competitive For Investors, But Wave of New Construction Could Change Market Conditions Later This Year
March 3, 2016
Last year set records for investment and M&A activity in the seniors housing sector, and a large joint venture portfolio acquisition by Welltower Inc. and the Canada Pension Plan Investment Board (CPPIB) suggests that deal activity shows no sign of letting up in 2016.

The Welltower/CPPIB JV this week closed the acquisition of a 97.5% interest in a six-property seniors housing portfolio in Florida known as Aston Gardens, with properties in Tampa, Naples, Parkland, Sun City Center and Venice. (CoStar COMPs #3430862)

The venture acquired the portfolio from private-equity firm Kayne Anderson Real Estate Advisors for $569 million in an off-market transaction -- significantly higher than the reported $400 million that Kayne Anderson paid GE Healthcare Finance for the assets in late 2013.

Welltower, Inc., formerly known as Health Care REIT, holds a 55% stake in the joint venture while CPPIB owns the remaining 45%. Discovery Senior Living, which develops and manages senior living community brands across the Southeast, Mid-Atlantic and Midwest regions, purchased the other 2.5% stake in the Kayne Anderson portfolio for nearly $15 million.

Aston Gardens includes six private-pay, primarily independent living seniors housing properties totaling 1,930 units. The lifestyle-oriented assets have amenities such as heated swimming pools, spas, fitness centers, beauty salons, resident clubhouses and activity centers, arts and crafts studios, putting greens, walking paths and concierge services.

HFF senior managing directors Ryan Maconachy and Chad Lavender represented Kayne Anderson Real Estate, which invests in off-campus student housing, seniors housing and medical office building and has raised four dedicated real estate private equity funds totaling more than $2.6 billion in commitments. The real estate unit is part of Kayne Anderson Capital Advisors, L.P., a $20 billion alternative investment management firm.

Senior housing investment and M&A activity reached record levels last year as occupancy hit an eight-year high, according to the just released CBRE Senior Housing Investor Survey and Market Outlook. Data from the National Investment Center for the Seniors Housing & Care Industry (NIC) shows that 514 institutional transactions closed in 2015 totaling $18.7 billion in sales.

Though the seniors housing market continues to perform well and attract substantial competition among investors, the environment will be challenged by high levels of new supply in coming quarters, CBRE said. NIC reports 48,903 units under construction as of year-end 2015, more than double the units under construction at the end of 2012.

Survey results revealed that investor interest in independent living properties increased sharply over the past 12 months, coming in just behind assisted living as the largest opportunity for investment in 2016. Stand-alone memory care ranked as much less attractive to investors compared with recent surveys, coming in fourth, behind continuing care retirement communities (CCREs).
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