Senior Living Industry Veterans Launch Scarp Ridge Capital Partners with $300M Fund

A new firm led by senior living industry veterans, Scarp Ridge Capital Partners, is launching with a $300 million fund targeting value-add, opportunistic and distressed investment opportunities.

“Scarp Ridge will look to leverage our many years of investing experience and industry relationships to be the partner of choice to owners, lenders, sponsors, and developers by acquiring, recapitalizing or restructuring deals to preserve and enhance long-term value,” Rick Shamberg, a founder and managing director of Scarp Ridge, wrote Thursday in an email announcing the new venture.

While also targeting hospitality, the firm is focused primarily on senior housing, including independent living, assisted living and memory care. Scarp Ridge is targeting equity commitments of $10 million to $50 million.

Scarp Ridge’s strategy includes acquisitions that can be made below replacement cost, with value-add potential through capital expenditures, rebranding, new management or other strategies.

Scarp Ridge is also open to providing runway capital to existing owners, and may acquire non-performing loans and create structured financing involving debt, mezzanine products and preferred equity. 

“One of the differentiators between our fund and other capital sources is the intensive operating backgrounds of the principals and the complementary skill sets we’ve curated and brought together,” Shamberg told Senior Housing News in an email.

Shamberg has extensive experience in the senior living space, having held leadership and/or advisory positions with a variety of companies focused on investment and operations, including Draper & Co., Atwell Health Partners, Cerulean Partners, Chicago Pacific Founders/Grace Management and Turnaround Solutions/Arrow Senior Living. He also served as a special advisor to the Illinois Secretary of Commerce and in other public service roles, including time in the George H.W. Bush White House.

He is co-founding Scarp Ridge with Greg Rush, who previously partnered with Shamberg to own and operate a behavioral health facility. In 2015, Rush established Rush Capital Partners, which has a current focus on deploying rescue capital into structured investments or recapitalizations with a focus on hospitality and senior housing. His previous experience also includes leadership roles with Cadre, a data and technology driven real estate investment management platform that during his tenure invested about $600 million of equity and $1.5 billion of total transaction value into the multi-family, office and hotel sectors. In addition to helping lead several other firms, he served on the board of NorthStar Realty Finance Corp., and played a key role in driving the three-party merger that established Colony NorthStar, a $17 billion REIT.

They are joined by Kari Schmidt, who spent nearly 23 years with Brookdale Senior Living (NYSE: BKD). Schmidt first joined Brookdale when the company’s portfolio numbered 16 communities, and helped lead the organization as it expanded to become the largest U.S. senior living provider, with a current portfolio of more than 700 communities. As a division president with Brookdale, she held responsibility for over $1 billion in revenue across more than 300 communities. She began her career in the skilled nursing space and also served as regional director of operations for Eby Development and Management, helping to expand the company’s assisted living and memory care products into Midwest markets.

Scarp Ridge is launching at a time when the senior living market has been dislocated by the Covid-19 pandemic. The average assisted living acquisition price fell 30% in 2020, according to Irving Levin data.

More recently, cap rates have fallen, particularly for lower-acuity communities, a recently released CBRE report indicated. However, deals are still being done for below replacement cost, including Welltower’s recent acquisition of 86 Holiday Retirement properties. The real estate investment trust estimated that deal price to represent a 30%-plus discount to replacement cost.

And other funds are targeting value-add opportunities, including a new Heitman fund with nearly $2 billion in commitments.