Global investment firm KKR & Co. (NYSE: KKR) recently closed a $2 billion real estate fund that will be used to purchase value-add or opportunistic properties, including senior housing.
The new fund has already spent or committed approximately $250 million of the capital raised, and a portion of that $250 million is going toward senior housing, Billy Butcher, KKR’s co-head of real estate acquisitions in the Americas, told Senior Housing News.
“In that figure there is a [senior housing] investment that we currently have under contract that we’d be looking to close soon,” Butcher explained.
It remains to be seen exactly how much of the remaining $1.75 billion will be put toward seniors housing, though KKR sees itself as a potential senior living game-changer in more ways than one.
KKR is not a new player in the senior housing investment realm.
“Senior housing has been part of our investment strategy since we started our real estate business in 2011,” Butcher explained. The property type, for instance, was a “meaningful part” of KKR’s first real estate fund, which, among other things, helped to take McLean, Virginia-based Sunrise Senior Living private in 2013.
Despite selling its Sunrise stake in 2014, KKR certainly envisions a future for itself in the senior housing space.
“What we’ve liked about the sector and what we continue to like is that it’s an operationally-intensive sector,” Butcher said. KKR sees value in identifying senior housing assets that are managed inefficiently, purchasing them, and then replacing the existing operator with a trusted partner to drive occupancy growth.
After all, in senior housing, a community’s success is “heavily dependent on getting the right team in place,” Butcher explained.
“That’s what drew us to the sector,” he said. “That’s why we’ve continued to be an active investor.”
In the past, KKR has worked with large operators like Sunrise, as well as smaller, more regional providers that have impressed the investment firm. It’s possible that KKR will tap trusted contacts to replace underperforming operators, Butcher suggested.
KKR is also open to recapitalizing senior housing communities with higher occupancies and keeping existing, well-performing operators in place, he said.
When it comes to which senior housing properties will be targeted by KKR, the firm may cast a wide net. In fact, it’s not limiting its investments to specific regions, care types or operators.
“No restrictions,” Butcher said.
At the same time, KKR plans to leave a lasting mark on the senior housing industry in other ways.
“We do think there is quite a bit of opportunity for innovation in the sector, and to make it a much more compelling offering versus the alternative of staying at home,” Butcher said. “We’re hoping to really bring to bear all of the resources of the firm… [to make that happen].”
Written by Mary Kate Nelson