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Bahrain’s Arcapita Starts Building New U.S. Senior Living Portfolio

Move Comes Amid Rising Occupancies, Rents and Deliveries
January 18, 2016
Arcapita, the Bahrain-based global investment management firm, is looking to put together another sizable senior living portfolio in the United States.

The company started out 2016 acquiring a privately-held portfolio of senior living communities in Colorado in a joint venture with MorningStar Senior Living, an experienced operating partner specializing in this sector. The transaction totaled $85 million (about $433,675/unit or $349,795/bed).

Arcapita's latest purchase, in what is expected to be the first in a series of acquisitions of senior living facilities, consists of three assisted living and memory care communities with a total of 196 units and 243 licensed beds in Denver and Colorado Springs, CO.

Arcapita has previous experience in the senior housing sector. It acquired and sold a series of senior living investments with total transaction values in excess of $1.5 billion in the United States and United Kingdom.

"The target age group for senior living facilities in Colorado is projected to grow by almost twice the national average over the next five years,” said Martin Tan, Arcapita's chief investment officer. “Through its experience in this sector, Arcapita has identified a seasoned operating partner in MorningStar Senior Living, a company that has deep expertise in the Western markets of the United States, and a management team with decades of operational experience in senior living."

Seniors Housing Occupancy Rises to 90.1%

The average occupancy rate for seniors housing properties in the fourth quarter of 2015 was 90.1% as net absorption of units outpaced additions to inventory, according to the latest research from the National Investment Center for Seniors Housing & Care (NIC). This represented an increase of 0.2 percentage point from the prior quarter, and was 0.2 percentage point shy of its cyclical peak of 90.3% that was reached one year earlier.

As of the fourth quarter of 2015, occupancy was 3.3 percentage points above its cyclical low of 86.9% during the first quarter of 2010.

During the fourth quarter of 2015, the rate of seniors housing’s annual asking rent growth was 2.6%, which was 0.1 percentage point above the prior quarter’s pace and unchanged from its pace one year earlier during the fourth quarter of 2014.

Seniors housing annual absorption was 2% as of the fourth quarter of 2015, compared to 1.9% during the third quarter of 2015 and 2.6% during the fourth quarter of 2014.

In the fourth quarter of 2015, the seniors housing annual inventory growth rate was 2.2%, up 0.1 percentage point from the prior quarter and its strongest pace since 2010. Current construction as a share of existing inventory for seniors housing accelerated 0.2 percentage point to 5.5% as of the fourth quarter of 2015, which represents a new cyclical high.

“Since its low point in the second quarter of 2015, the seniors housing occupancy rate has increased by 40 basis points, but remains 20 basis points below its most recent cyclical peak in late 2014,” noted Beth Burnham Mace, chief economist for NIC. “This shows that demand has generally been able to keep pace with the significant growth we’ve seen in supply and speaks to the relatively solid fundamentals in the sector.”

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