Investment Group Plans to Acquire $2 Billion in Senior Living Assets

ROC Seniors Housing Fund Manager, already one of the largest private equity investors in senior living in the nation, is looking to become an even bigger player. Having just launched its second fund, ROC Seniors intends to acquire more than $2 billion of senior housing and medical properties.

A subsidiary of Salt Lake City-based Bridge Investment Group Partners LLC, ROC Seniors raised $737 million in equity in its first investment fund, which closed in June 2015. Currently, ROC Seniors has a portfolio of about $1.5 billion in assets, comprised of 51 properties with four acquisitions set to close soon.

The target is $750 million for ROC Seniors Housing Fund II, and capital is actively being raised, CEO Robb Chapin told Senior Housing News.

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Already, a pipeline of assets totaling about $300 million has been established for this fund, Chapin said.

The majority of acquisitions made through the new fund will be in private pay senior housing, with an estimated 10%-15% being properties such as medical office buildings, outpatient surgical facilities, and the like, according to Chapin.

ROC Seniors has achieved success through a strategy of value-add plays, and this will continue to be its bread-and-butter.

“We’ve got a purpose-built team that really is designed around going in and mining value in assets that have a lot of obsolesence in them,” Chapin said. “We’re not afraid to roll up our sleeves, get our hands dirty, and reposition these assets, making the property relevant again.”

Describing ROC Seniors as longer-term owner, Chapin said that eight to 10 years is the general lifecycle of their funds.

“We’re very committed to every property we buy,” he said.

The Where and the What

Primarily, ROC Seniors is interested in the top 30 metro markets as identified by the National Investment Center for Seniors Housing & Care (NIC). However, the first fund invested in properties across a range of geographies, and the current ROC Seniors portfolio includes assets in 21 states.

About 10% of capital will be allocated to new development projects, and in both its acquisitions and construction ventures, market selection is undertaken carefully.

“We look hard at local market penetration rates, gaps in supply, as well as the income and age -qualified population base that’s stable and growing,” Chapin said. “We are hawkish on the right markets for new construction and stay away from low barrier to entry markets for new development.”

As for what type of senior housing assets ROC Seniors is targeting, the group likes independent living, assisted living, and memory care, but generally prefers a continuum to standalone memory care.

“We believe that as society continues to embrace seniors housing as a quality of life [opportunity], we think there’s a bigger opportunity to catch people on the front end when they have a lot of independence,” Chapin said. “We just feel like it represents a more balanced overall investment for us. We’re able to capture, agian, the segment of the market that’s more sticky to the community and it creates incremeental value for us overall.”

ROC Seniors currently works with about a dozen operators, Chapin estimated, but the company is always looking to partner with additional high-quality operating companies. With decades of experience in senior housing, the ROC Seniors team has deep relationships on the operator side and has a good sense of what is needed for a particular community, he said. For example, some operators specialize in larger communities while others excel at smaller buildings, and having the right operator for the geographical area also is an important element of success.

Like other private equity players, ROC Seniors has benefited somewhat from a pullback among large-cap real estate investment trusts (REITs) that occurred earlier this year. With these powerful players sidelined in terms of M&A activity, platforms such as ROC Seniors had some buying opportunities, Chapin confirmed. However, REITs mainly go after stabilized properties versus the type of turnaround assets ROC Seniors targets, he noted.

Going forward, he expects the REITs will return to a more “offensive posture.”

“That’s good for the industry overall, more capital flowing into it,” Chapin said. “It doesn’t impact our investment thesis so much because REITs need to buy fully stabilized communities with strong cash flow and growth opportunities. Our portfolio will represent that investment opportunity for the large-cap REIT over time.”

Written by Tim Mullaney

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