Seniors Housing Business is the magazine that helps you navigate the evolution of the seniors housing industry.
Issue link: https://seniorshousingbusiness.epubxp.com/i/484276
Real estate in general, and seniors housing in particular, is attractive to these investors. Real estate funds managed by private equity frms held an all-time high of $742 billion in assets at the end of 2014. That fgure takes into account all property types, ranging from trophy offce prop- erties to self storage, according to Preqin. "There is a great deal of insti- tutional confdence in the real estate asset class and its ability to meet portfolio objectives," says Moylan. "Institutional inves- tors are receiving high levels of distributions from their existing commitments and strong returns on average." Annualized returns from private real estate invest- ments averaged 16.7 percent over the last three years, according to Preqin. In 2014, a dozen funds focused exclusively on niche properties types — from seniors housing to student housing — raised $2.6 billion from investors. That's up from $1.8 billion the year before, and the highest level of fundrais- ing for niche property funds in the last 10 years. KAREA's third real estate fund was its frst to signifcantly invest in seniors housing. The fund raised $750 million. Fundraising is now well under way for the Boca Raton, Fla.-based frm's fourth real estate fund, which will invest in a number of niche property types, with 75 percent of investment activity split between seniors housing and medical offce properties. Prudential Real Estate Inves- tors (PREI) has also found enthu- siastic investors. It raised $568 million for its Senior Housing Partners Fund IV, which closed its fnal round of fundraising in 2012. That's signifcantly more than the $370 million that PREI's Senior Housing Partners Fund III raised in 2006. "Each seniors housing fund tends to get a little bit larger with a few extra clients," says Noah Levy, managing director for PREI. "The interest in, and the knowledge of, seniors housing is growing." Strong performance under pressure Private equity investors are drawn to seniors housing partly because the asset class performed quite well during the Great Recession. From 2008 to 2011, average rent growth for seniors housing properties never dipped below 1 percent a year, according to the National Investment Cen- ter for Seniors Housing & Care. "Ours is the only property type that didn't experience negative rent growth," says Beth Mace, chief economist for NIC. In con- trast, retail, offce, and multifam- ily properties all suffered falling rents on average during and after the crash. Many experts now believe that seniors housing is a countercycli- cal investment, meaning invest- ments in seniors housing may keep their value even in tough economic times. "Seniors hous- ing is driven by slightly different things than other property types," says Mace. "It acts differently than stocks and bonds." Seniors housing can perform well in a downturn because the demand for seniors housing is not necessarily based on market cycles — particularly for seniors housing types like assisted living or memory care that serve people with acute medical needs. "Poten- tial residents can try to postpone the decision to move into seniors housing, but often they can't," says Mace. Some private equity funds that invest in seniors housing have experienced that resilience for themselves. PREI's Senior Hous- ing Partners Fund III acquired properties in 2006, 2007 and 2008, some of the peak years of the real estate boom before the crash. Seniors Housing • Medical Offce • Post-Acute Facilities Investing in the Growth of America's Healthcare Ross Sanders Vice President – Seniors Housing rsanders@arlcap.com (314) 221-8543 Todd Jensen Chief Investment Offcer tjensen@arlcap.com (561) 252-2478 American Realty Capital Healthcare II Advisors, LLC 405 Park Avenue, New York, NY 10022 www.thehealthcarereit2.com Allegro of Jupiter - Jupiter, FL The Wellington at Hershey's Mill - West Chester, PA Meadowbrook Senior Living - Agoura Hills, CA Brendan Phalen Vice President – Seniors Housing bphalen@arlcap.com (646) 395-6129 Largest North American real estate funds focused on alternative property sectors (funds closed 2012–2014) Fund Manager Size Sector Focus Harrison Street Real Estate Partners IV Harrison Street Real Estate Capital $750 million Medical/healthcare, self storage, seniors housing, student housing Kayne Anderson Real Estate Partners III Kayne Anderson Capital Advisors $750 million Seniors housing, student housing Prudential Senior Housing Partners IV Prudential Real Estate Investors $568 million Seniors housing AEW Senior Housing Investors II AEW Capital Management $371 million Seniors housing Source: Preqin www.seniorshousingbusiness.com 33 February-March 2015 n Seniors Housing Business