Private Equity Group Taps EB-5 to Fund $750 Million Assisted Living Pipeline

A California-based private equity firm is moving forward with plans to develop $750 million worth of new senior housing construction over the next three years, for which it’s enlisting foreign investors to help fund a portion of the pipeline.

Over the next 36 months, PDC Capital Group, a firm based in Costa Mesa, Calif., will develop 25 SummerPlace Assisted Living & Memory Care communities throughout its home state as well as Arizona, Florida, Illinois, Texas and the Carolinas.

Of the firm’s $750 million investment, PDC Capital plans to use more than $250 million in funding from EB-5 immigrant investors toward the development of its 25-property pipeline.

Created in 1990, the EB-5 immigrant investor visa is a federal program administered by the U.S. Citizenship and Immigrant Services (USCIS) that allows foreign nationals to apply for residency in the U.S. in exchange for investing a minimum of $1 million, or $500,000 for rural and high unemployment areas, into a U.S. business.

One condition of the program is that each foreign investment is required to generate at least 10 jobs within two years in order for an investor to maintain permanent residence status.

“Assisted living is a growth industry and has the potential to generate hundreds of good jobs in the health care sector in areas that need employment growth and high quality senior housing,” said Emilio Francisco, CEO of PDC Capital Group.

Last month, the firm broke ground on SummerPlace Lincoln, a $26 million community located 25 miles northeast of Sacramento. The development, which is expected to open in fall 2016, will add 228 beds to the region and will create at least 135 jobs in the area.

For the planned pipeline of projects, the typical senior housing development will cost PDC Capital an average $30 million per facility, with EB-5 funds representing approximately 20-30% of the capital stack, the company said to SHN via email.

With a capital stack that consists of EB-5 funds, private equity and financing from traditional senior housing lenders, PDC Capital estimates the EB-5 contribution to the investment mix is roughly $10 million per facility.

As senior housing developers seek more creative funding sources for their next projects, more have turned to programs like EB-5, attracted by the fairly low-cost capital and growing interest from deep-pocketed foreign investors looking to receive mild returns and, above all, gain citizenship.

Senior living developers such as Birmingham, Ala.-based Omega Communities and Vero Beach, Fla.-based RockBridge Senior Living are two companies experiencing success by leveraging EB-5 funding.

Earlier this year, Omega Communities said it has plans to raise up to $20 million in Eb-5 funds to help finance the development of two senior living projects in Florida and Puerto Rico. The company had two of its EB-5 Regional Centers—businesses approved by USCIS and through which the federal program operates—launch last year in February and April 2013, each creating over 400 jobs.

Through this alternative funding strategy, Omega has been able to realize savings between $300,000 to $500,000 by providing debt and equity on a short-term basis and then replacing it with EB-5 funds.

For RockBridge, the program enabled it to fund 30-50% of its capital stack to assist in constructing developments of up to 80-units with project costs ranging between $12 million to $15 million.

The impending demographic boom and ensuing demand for senior housing bodes well for developers and investors who are confident the EB-5 program will gain traction and become a more utilized funding source in the senior living industry moving forward.

“We believe that the EB-5 program is one of the best programs designed by the government to create jobs, attract private equity from foreign investors and stimulate our economy,” PDC Capital told SHN. “It is an excellent program that we expect to continue for many years.”

Written by Jason Oliva