Two of the leaders behind the ascension of Brookdale Senior Living (NYSE: BKD) to mega-provider have teamed up again, acquiring a portfolio of independent living properties for $180 million.
The joint venture reunites John Rijos, a former co-president and COO of Brookdale, and Bill Doniger, former Brookdale board member and former managing director at Fortress Investment Group (NYSE: FIG). Doniger and his partner, Wes Edens, recruited Rijos to join Brookdale at a time when the Brentwood, Tennessee-based provider had only about 20 communities. Brookdale had grown to about 650 communities when Rijos left in 2013—and a year later, the mega-merger with rival Emeritus Corp. made Brookdale the largest senior living provider in the nation by a substantial margin, with more than 1,100 communities.
After leaving Brookdale, Rijos co-founded Chicago Pacific Founders (CPF), a private equity group that got off the ground with a $500 million investment fund. Within about 20 months, CPF and affiliated CPF Living Communities have created a portfolio of about 30 senior housing properties. Doniger, meanwhile, had moved on from Brookdale and Fortress to lead private investment firm Grand Park Capital Management as managing partner. The stage was set for the two men to partner up on a project.
“Bill called me three or four months ago, said I have this deal, unbrokered, and we can own it with our investors,” Rijos told Senior Housing News.
Minneapolis-based Grace Management, an affiliate of CPF Living Communities, will operate the four Town Village-branded properties:
– Town Village Audubon Park in Memphis, Tennessee (176 units)
– Town Village Sterling Heights in Sterling Heights, Michigan (222 units)
– Town Village Tulsa in Tulsa, Oklahoma (198 units)
– Town Village Vestavia Hills in Birmingham, Alabama (222 units)
These are high-end, Class A properties in markets that might not be considered quite Class A—but the communities are ideally situated on prime real estate within their markets, according to Rijos. Town Village Tulsa is close to Oral Roberts University, for instance.
The communities have a portfolio-wide occupancy of 90%, and this is one area that Rijos and his partners believe can generate more value.
“These communities are so good, there’s no reason they shouldn’t be at 93% or 94%,” Rijos said. “We’ll hold on to these for a good, long time and create lots of value.”
The first order of business will be the addition of memory care at two of the locations—in Sterling Heights and Tulsa. Both these communities have been discharging roughly 30 to 35 residents to memory care each year, so the new JV is planning to build about that many memory care units on available land next to the existing buildings.
“Why should I sent that to other people?” Rijos says of the memory care business the communities have been losing. “We’ll send it to ourselves and increase the value of the portfolio.”
After memory care, the new owners are planning to examine options for adding other new service lines.
Transactions in senior housing have been somewhat sluggish, as high prices sidelined some major real estate investment trusts (REITs) and other buyers early in the year. A recent uptick in acquisitions, including a $1.15 billion portfolio deal, sparked speculation that activity might be again ramping up. However, this CPF transaction should not necessarily be cited as further evidence of any larger shifts in the marketplace.
“The sellers were at the end of their fund life and it was time for them to sell, and Bill [Doniger] had the rights to market [the portfolio],” Rijos said. “That happens in private equity, funds have to capitalize, they have to sell. So sometimes, you catch things at an unusual time, but those are the inefficiencies in the marketplace I look for and like.”
As for whether this is the start of anything bigger for Doniger and himself, Rijos said they have nothing else in the works at the moment. However, he is not ruling anything out.
“When we closed this deal today, he and I were laughing, it’s like the old days, let’s do another one next year,” Rijos said. “I wouldn’t be the least bit surprised if he and I do another one at this level of investment or higher.”
Written by Tim Mullaney