Harrison Street Real Estate Capital acquired seven class-A seniors housing properties located throughout Nassau and Suffolk County on Long Island in New York. The approximately $380 million acquisition was completed by the Chicago-based Harrison Street Core Property Fund, the firm’s core open-ended vehicle, with a combination of equity and the assumption of existing debt from Freddie Mac. The firm also formed a joint venture with the Engel Burman Group, which developed all of the assets. Engel Burman made a significant equity investment in the joint venture and will continue to manage the properties. HSRE and Engel Burman will also partner on additional opportunities.
“We are excited to not only be able to acquire such a premier quality, stable portfolio in high-barrier to entry markets, but to also form a joint venture with an outstanding organization like Engel Burman,” Christopher Merrill, CEO and president of HSRE, said in a statement.
The seven assets collectively comprise a total of 1,047 beds, 80 percent of which are assisted living, with the balance dedicated to patients with memory care needs. Across the portfolio, residents pay an average of approximately $4,200 per month to rent assisted living units and $5,500 for memory care units. With the addition of these assets, the HSRE senior housing portfolio includes 68 properties valued in the aggregate in excess of $1.3 billion.
Engel Burman President Jan Burman said in a statement, “This acquisition safeguards our local market share and strategically situates our company for future regional growth utilizing the platform we created in the late 1990s. Owning these assets once again, while aligning ourselves with a strong institutional partner who shares our vision for growth, ensures that The Bristal will remain the benchmark for excellence in assisted living.”
In targeting assets in the seniors housing sector, HSRE believes that it is able to capitalize on strong and sustainable demographics. “The U.S. population continues to age. In fact, the 70-plus-year-old population that uses facilities like The Bristal assets is expected to grow by 3.7 million by 2015 ... 2020 is the first year [members] of the baby boomer generation reach 75 years of age,” added Michael Gordon, Harrison’s principal and transaction group co-head.
The Bristal properties continue HSRE’s acquisition strategy to focus on private-pay rental properties that serve independent living, assisted living and memory care residents that allow them to age in place. For example, The Bristal at East Northport includes 100 assisted living units and 32 units for residents with memory care needs. The newly constructed project, which is located in a strong demographic in-fill area of East Northport, Long Island, with a large and growing senior population, was opened in 2012 and is already 100 percent leased.
HSRE’s Core Property Fund, which was launched in December 2011, continues the firm’s focus on investments in the demographically driven sectors of education, health care and storage real estate. Distinct from its closed-end opportunity fund series, which invests opportunistically in these asset classes in order to create value and generate capital appreciation returns, HSRE's core fund is focused on investments that produce current and consistent income over an anticipated longer hold period. The core fund, which complements the HSRE opportunistic fund series, now owns 19 assets with a gross real estate value of approximately $800 million.