Capturing more U.S. senior housing business appears to be a priority for Jones Lang Lasalle (NYSE: JLL) as it seeks the leading share of global capital outflows for real estate, with the recently announced $260 million acquisition of Oak Grove Capital contributing to that goal.
When the deal closes, all 120 Oak Grove employees will be part of JLL; the Chicago-based firm has more than 58,000 employees across 230 corporate offices in more than 80 countries. In addition to assisting in sales, acquisitions and repositioning of senior housing communities and securing financing for capital projects or debt retirement, JLL helps owners, operators and investors assess needs, feasibility and real estate opportunities. Its capital markets business extends to a variety of sectors, including retail, office and industrial.
St. Paul, Minnesota-based Oak Grove is one of the nation’s “longest standing providers of debt financing for multifamily and seniors housing real estate,” JLL stated in announcing the transaction. Oak Grove is a Fannie Mae, Freddie Mac, HUD approved nationwide lender with a $9.5 billion portfolio.
The acquisition was driven in part by the evolving needs of clients.
“JLL and Oak Grove Capital have very few overlapping services,” Heather Filkins, JLL vice president of public relations, investor relations, told SHN. “JLL has a very strong debt and equity and multifamily presence across the country, and the acquisition of this market-leading agency finance business will allow us to complement those services and nimbly respond to increasing client demand … Combining the two firms will increase our ability to win more business together, create real value for clients and provide a broader suite of services.”
More information about new services and products available for senior housing clients will be available after the deal closes, Filkins said.
In the short-term, existing senior housing clients should not be aware of any changes, Filkins said. Oak Grove’s clients ultimately will be able to tap into JLL’s integrated global services platform and take advantage of its “deep resources, cutting-edge tools and broad-reaching connections,” she said.
Oak Grove CEO David Williams and President Kevin Filter will continue to helm the Oak Grove lending platform out of the St. Paul office, although the two also will take an “active role in shaping and leading JLL’s multifamily business,” Filkins said.
Oak Grove sees senior housing market as “very attractive,” given favorable demographics, high investment yields compared to other asset classes, and strong and significant investor interest that includes industry veterans as well as new participants and foreign capital, Oak Grove Executive Vice President Jessica Wolters told SHN.
The two companies together will have more than $4 billion in annual originations and $14 billion in loan servicing. In 2014, Oak Grove had $1.4 billion in agency volume, while JLL had $4 billion in multifamily sales transactions, including health care-related multifamily housing, according to a presentation on the acquisition. That presentation also identified the transaction as part of the company’s objectives around global capital flows for real estate.
The acquisition is expected to be accretive in calendar year 2016 and drive high revenue growth for JLL.
In terms of valuation, there is a consideration payable at closing of $175 million, which Oak Grove will use in part to retire outstanding debt, according to the presentation. Oak Grove has the potential to earn additional consideration over a five-year earn-out structure tied to performance, and the expected total purchase price is $260 million. The acquisition is to be funded through JLL’s existing $2 billion revolving credit facility.
Written by Tim Mullaney