[Updated] Lancaster Pollard Acquired by ORIX, RED Capital to Change Focus

Lancaster Pollard, which is routinely ranked as the top FHA/HUD senior living lender, has been acquired by ORIX USA, a division of international financial services group ORIX Corporation.

ORIX already owns another major senior housing lender, RED Capital. Going forward, senior housing services will be consolidated under the Lancaster Pollard brand.

Columbus, Ohio-based Lancaster Pollard Holdings LLC is a provider of integrated investment banking, balance sheet lending, mortgage banking and private equity services. ORIX signed a definitive agreement to purchase Lancaster Pollard on June 9 and completed the deal on Sept. 12, the companies announced Tuesday.

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The purchase price was a little more than $300 million, according to a Commercial Mortgage Alert in early August. That price was not confirmed, however, and is not accurate, people with knowledge of the deal told Senior Housing News.

Now, Lancaster Pollard becomes a new, distinct subsidiary of ORIX, alongside Boston Financial Investment Management and RED Capital Group, the latter of which became wholly owned by ORIX USA Corp. in March 2016.

The time was finally right for such a transaction to take place, according to Lancaster Pollard President Nick Gesue.

“For about the last four years we have been majority owned by a private equity firm that had a finite investment period,” Gesue told Senior Housing News. “It would be inevitable that we would have to replace them.”

ORIX made sense for Lancaster Pollard, he added.

“We’re really excited about the partnership with ORIX. ORIX is a long-term owner, which is something that we’re very much looking for,” Gesue said. “The ability to have a long-term parent company is attractive to me.”

Lancaster Pollard looks forward to leveraging ORIX’s large capital base and depth of knowledge about a variety of different markets, he explained, adding that Lancaster Pollard hopes to “deepen [its] existing products or add new products” under ORIX.

Currently, ORIX USA and its family of companies hold $8 billion of assets and manage an extra $34 billion.

From this point on, under the umbrella of ORIX Commercial Mortgage Servicing, Lancaster Pollard is set to concentrate on the capital, financial and advisory needs of senior living and health care clients. RED will do the same in the market rate and affordable multifamily sectors. Boston Financial, meanwhile, will continue to offer tax credit equity and associated development capital to all three housing sectors.

Executives at RED Capital thought the move made sense.

“As we looked across the businesses of RED and Lancaster Pollard, we saw two areas where we overlap and compete: seniors housing/health care and affordable housing,” RED Capital Group Chairman and CEO Ted Meylor told SHN. “After pondering how to eliminate two of the top industry companies from competing with each other, it became clear that we should combine the respective business lines in a way that benefits our clients. We saw compelling synergies for both businesses and decided to combine the seniors housing/health care in Lancaster Pollard and affordable housing into RED.”

It should be noted that RED could still bring in seniors housing opportunities, according to Meylor.

“While in due course RED will not be calling on seniors health care borrowers, we will likely have seniors opportunities through our existing market rate multifamily and affordable housing clients,” he said.

It’s not expected that there will be any staffing or location changes for Lancaster Pollard or RED, Gesue said, though both groups are in the process of integrating their affordable multifamily teams and their senior housing teams.

“Now that the transaction is closed, we are working very closely with RED leadership to make sure we can manage that transition appropriately,” Gesue said. “We don’t have all questions completely answered at this point, but we’ve been in contact and have over the last couple of weeks had more and more meetings with the groups to begin to get to know each other.”

All the while, these three ORIX subsidiaries will keep operating as distinct companies with their current management, according to the press release. Andrew Garvey, senior managing director and head of ORIX Commercial Mortgage Servicing, will assume overall responsibility across the three businesses, managing the synergistic growth opportunities offered by the bigger platform.

“ORIX Commercial Mortgage Servicing is well-positioned to make a positive impact on the U.S. housing infrastructure through the subsidiaries of Boston Financial, Lancaster Pollard and RED,” Garvey said in the press release. “Further, we believe that having RED focus on its leading position in affordable and market rate multifamily housing and Lancaster Pollard focus on its leading position in seniors and healthcare housing will provide clients with the highest level of expertise and service and also ensure optimal coordination with the housing agencies and FHA. Together, this group of well-known, industry-leading brands will provide a comprehensive product offering, seasoned sector expertise, unparalleled client coverage and high levels of service.”

Lancaster Pollard was the top HUD Lean lender for fiscal year 2016—and it has been since 2010. Specifically, Lancaster Pollard closed 60 transactions worth $554.4 million during fiscal 2016.

Advisers for ORIX USA on the acquisition of Lancaster Pollard included Houlihan Lokey Inc. and Beekman Advisors Inc. for financial and Weil, Gotshal & Manges LLP for legal. For Lancaster Pollard, Kramer Levin Naftalis & Frankel LLP acted as legal adviser and Credit Suisse Securities (USA) LLC acted as financial adviser.

Written by Mary Kate Nelson

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