Prudential Real Estate Investors (PREI) continues to build its senior housing portfolio, setting its sights toward populous “NFL cities” as favorable operating conditions offer ripe investment opportunities.
The real estate investment and advisory business of Prudential Financial, Inc. (NYSE: PRU), PREI sees future investment activity fueled by favorable operating conditions, according to Steve Blazejewski, principal on PREI’s senior housing team.
“We’re seeing positive operating trends and favorable winds in the senior housing sector, especially considering the benefit of the demographic wave over the next 10 to 15 years,” said Blazejewski.
In April 2012, the investment group raised $568 million from institutional investors for its fourth senior housing fund, Senior Housing Partners IV—the largest senior housing fund ever for the firm.
Moving forward, the company’s strategy will be to continue to align itself with “top-notch” senior living providers.
“Our success is largely due to the strength of the operator and their ability to perform,” said Blazejewski. “Our strategy is to align ourselves with capable operators and to identify additional opportunities that provide for successful investments with respect to achieving our returns.”
PREI is also heavily reliant on geographic preference when acquiring assets, looking toward what Blazejewski refers to as “NFL cities” in terms of size, population and demographic presences.
With investments located in retirement areas such as like Florida, Arizona and Texas, PREI’s investment activity has reached greater than half of the fifty states as it continues to aim toward places where seniors and their adult children live.
Transaction sizes range greatly for the fund, depending on the nature of the deal and whether it is a portfolio or single asset, notes Blazejewski.
“A typical investment may average $20-$25 million per community, although there is considerable variability,” he said.
The most recent senior housing acquisition for PREI was an assisted living community in Crabapple, Georgia from AEW Capital Management, a Boston-based real estate investment trust (REIT).
The 93-unit Class A community, Arbor Terrace at Crabapple, embodies the type of senior housing communities PREI looks to add to its investment portfolio, Blazejewksi noted. These sought after communities include recently built private-pay communities for independent living, assisted living and memory care.
Though it is premature to speculate raising funds for a fifth senior housing fund as PREI continues to deploy its Senior Housing Partners IV, according to Blazejewski, the group is optimistic toward future investment opportunities, even in a competitive acquisition market dominated by REITs.
“It’s certainly been a challenging environment in terms of competition for deals, but depending on interest rates and the cost of capital, we think we can be well-positioned for growth in the coming months,” Blazejewski said.
Written by Jason Oliva