Recent senior housing acquisition activity shows continued confidence in the sector. Yields on the 10-Year Treasury note have declined since the start of the year, further reducing interest rates for 10-year and 15-year loans that are tied to it and senior living providers are moving to take advantage of this.
Discovery Senior Living Takes Action in Florida
In Florida, Discovery Senior Living has partnered with Kayne Anderson Real Estate Advisors in a joint venture operation and now has a five community pipeline of projects underway in the state. The value of this pipeline is roughly $200 million and it consists of a 120-unit assisted living facility in Naples, a 120-unit assisted living facility in Tampa, a 125-unit assisted living facility in Sarasota Bay, a 216-unit facility in Grand Haven, and a 120-unit assisted living facility in Palm Beach Gardens. Discovery’s goal is to eventually turn each of these facilities into continuing care retirement communities. It also plans to develop independent living facilities and has acquired land next to many of its assisted living projects that it will use for this purpose. Many companies are hesitant to change their existing senior living facilities into continuing care retirement communities because they believe the entrance fee involved will make it hard to attract residents; however, Discovery does not subscribe to this belief and is confident that because of its scale it can generate costs savings that will help its CCRC communities remain profitable.
A REIT Takes Steps to Prepare for More Acquisitions
In addition to Discovery Senior Living, the healthcare real estate investment trust, CNL Healthcare Properties is also taking steps to acquire additional senior housing properties. CNL has been extremely active in acquiring properties of late as evidenced by its purchased of a 12-property senior living portfolio for $302 million last December and another purchase of four senior housing properties for $88.3 million back in February. The facilities that were purchased were located in a number of different states in the West and Midwest and CNL is now taking steps to expand its senior living portfolio even further.
In order to position itself to make even more acquisitions CNL has increased its original credit line of $120 million to $275 million, with the option to increase it even further to $325 million. CNL made it clear that it intends to use its newly expanded credit line for additional acquisitions when its president and CEO, Stephen H. Mauldin stated that “The initial line of credit has helped us substantially grow our senior living and healthcare portfolio over the last several months. The expanded facility will further assist us in taking advantage of compelling investment opportunities as we continue to broaden and diversify our portfolio.”
The actions taken by Discovery Senior Living and CNL Healthcare Properties to acquire senior housing assets and put themselves in a position to acquire even more by either entering into a joint venture and purchasing land to build additional facilities as is the case with Discovery Senior Living, or increasing its credit line to make additional acquisitions, as CNL has done, demonstrates a proactive strategy to take advantage of continued low interest rates to increase their senior asset holdings. Senior living providers and others who are interested in pursuing a similar strategy should contact Cambridge Realty Capital to learn more about its joint venture financing program and the other programs that it offers to facilitate acquisitions in the space.