In a sign that seniors housing is perhaps one of the only safe havens for commercial real estate investors, multifamily property owner and developer the Clarett Group has purchased a seniors housing company with plans to expand the brand. New York City-based Clarett bought FountainGlen Portfolio Management of Irvine, Calif. The company includes a property management company and a development business.

FountainGlen manages and develops upscale apartment buildings for persons age 55 and older. The firm currently manages 10 properties in Southern California. The properties were developed by FountainGlen and are owned by an institutional investment partnership.

The growth of the older population in the United States will spur demand for "this type of age-restricted rental product," says Frank Stephan, senior managing director at the Clarett Group's Los Angeles office. "As baby boomers assess their housing needs, we think the FountainGlen model will suit them perfectly." He expects to grow the portfolio by developing new properties and adding managed properties.

The transaction value was not disclosed. Clarett's investment partner, Prudential Real Estate Investors, is the majority partner in the FountainGlen purchase. Current management will operate FountainGlen. Its president and founder Glenn Carpenter remains at the company.

FountainGlen buildings typically feature about 200 to 250 units. The buildings offer no services and are meant to cater to younger seniors who want an amenity-packed property, with features such as lush grounds and swimming pools. Other amenities include fitness and business centers, game rooms and screening rooms. "The properties are immaculately kept," says Stephan.

Each building also has an activity director who coordinates classes, programs and parties for residents. "We create a community, like a neighborhood," notes Stephan. "It's all about living with your peers."

The purchase comes at a time when occupancies at independent-living buildings are falling. In the third quarter of 2008, the most recent report available, average occupancy had declined to 89%, a 4% drop from early 2007, according to the National Investment Center for the Seniors Housing & Care Industry (NIC).

Occupancies at independent-living buildings in the Los Angels area have held up better than elsewhere, however. In the third quarter of 2008, the occupancy rate was 91.2%, compared with 92% a year earlier. The Los Angeles area posted a 3.3% growth in the supply of independent-living units from 2002 to 2007, one of the smallest increases among large metro areas, according to NIC.

At FountainGlen at Anaheim Hills, occupancies are currently pegged at 96%, according to the property manager. Rents range from $1,255 to $1,585.

Clarett's goal is to manage the portfolio and expand it. "We bought a management system," explains Stephan. He won't say what investment returns are expected. "We have acquired a company that has mastered the management process with this housing sector. We want to create more developments of this same product type."

Clarett is currently seeking development opportunities for FountainGlen in Southern California, where both companies are active. Clarett plans to begin construction later this year on a $400 million, mixed-use apartment project in Hollywood, Calif.

Land sellers are reducing their prices, Stephan notes. "The timing is opportune." Condominium developers that had been buying available land are out of the market because of the housing crunch. "Land sellers have an incentive to deal with companies that have a proven track record to close deals," he says.

FountainGlen also will expand to New York and Washington, D.C., cities where Clarett has offices, says Stephan. "Those areas have strong demographics for age-restricted housing, just like Southern California."