Private REIT Opts to Build Rather Than Buy Senior Housing Assets

While most real estate investment trusts are using their lower cost of capital to acquire income-producing senior housing assets, one private and externally-managed equity REIT is growing its portfolio through ground-up development.

Edgewood REIT triple net leases most of its properties to Edgewood Group LLC, a senior housing operator that also owns a development and construction company, reports REIT.com

“It’s a tough market out there and we found that it’s easier for us to design and build a facility that we want from the ground up. The fact that we have a development and construction arm is a huge benefit,” Rex Carlson, Edgewood REIT’s chief operating officer and treasurer, told REIT.com. “While it may cost $700,000 to $1,000,000 to get it stabilized in terms of operating expenses, it still makes more sense to do that than to overpay for an existing facility that has a lot of problems, or that is simply overpriced.”

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Edgewood is making acquisitions, as well, some through a partnership with fellow REIT Investors Real Estate Trust (NYSE:IRET), but Carlson says he expects the future growth of his company will be primarily driven by new development.

There are plans to develop up to five new communities in the next year and a half, REIT.com reports. Two projects, in North Dakota and Idaho, are already under construction. 

Shifts in consumer preference are shaping Edgewood’s new communities along with renovations to existing properties. Most new developments include lots of common areas and amenities for residents, says the article, including movie theaters, beauty salons, fitness centers, convenience stores, and chapels. 

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Read more at REIT.com.

Written by Alyssa Gerace

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