Two dozen senior living communities owned by real estate investment trust (REIT) HCP Inc. (NYSE: HCP) are getting a new operator, transitioning from Brookdale Senior Living (NYSE: BKD) to Atria Senior Living.
Brentwood, Tennessee-based Brookdale is the largest senior living provider in the nation, and has been facing financial and operational challenges since its 2014 merger with rival Emeritus Corp. Now under a new CEO, Brookdale is looking to trim its massive portfolio of more than 1,000 communities. At the same time, HCP has been working to lessen its exposure to Brookdale. This transaction will reduce the concentration by about 4%, HCP Vice President of Finance and Investor Relations Andrew Johns told Senior Housing News. That would bring the total Brookdale concentration down to slightly more than 20%.
The properties are expected to begin transitioning to Atria this month, with the process continuing through September. Louisville, Kentucky-based Atria was ranked the seventh-largest senior living provider in 2017, operating more than 200 communities. It has been managing six properties owned by HCP.
“We are pleased to meaningfully grow our relationship with Atria,” said HCP President and CEO Tom Herzog, in a press release issued Monday. “Atria has a proven track record of providing outstanding care for residents and strong property operating performance for owners. We have been discussing ways to grow together and this agreement is a win-win for both organizations.”
The 24-property portfolio is a mix of independent living, assisted living and memory care, HCP’s Johns said. The buildings are concentrated in Florida, Texas and New Jersey and are below the average occupancy for HCP’s senior housing assets.
“Call it mid-80% occupied, with definite upside potential,” Johns said.
Half of the communities have been triple-net leased to HCP and half were in the REIT’s seniors housing operating portfolio (SHOP). Going forward, they will all be SHOP assets.
“As you know the Atria platform is built for growth and taking on more properties from high quality, long term owners like HCP,” Atria CEO John Moore said. “We’ve known the HCP management team for a long time and we are thrilled to further develop our relationship.”
That Atria platform includes technology systems built in-house, as well as a variety of vertically integrated support services, many of which are run out of the company’s relatively new Louisville headquarters.
Currently, Atria is in growth mode, looking not only to increase its third-party management business but to undertake real estate development and redevelopment projects, harnessing capital raised through a new partnership with Fremont Realty Capital. The real estate private equity arm of Fremont now owns 33% of Atria’s management services business, with senior executives at Atria owning 33% and Chicago-based REIT Ventas Inc. (NYSE: VTR) owning 34%. Ventas also owns the real estate of 176 Atria communities.
Written by Tim Mullaney