Asian Conglomerate Keppel Acquires 50% Stake in Watermark for $77 Million

Watermark Retirement Communities, one of the largest senior housing operators in the United States, has a new equity partner to help drive growth in both U.S. and international markets.

Keppel Corporation—a Singapore-based company known for building offshore oil rigs—is acquiring a 50% stake in Watermark for around $77.3 million. In addition to the company’s substantial offshore and marine business, Keppel’s property arm is a major home and office developer in Asia, and the company also has infrastructure and investment divisions. Revenue for the overall enterprise was about $6 billion in 2017.

Tucson, Arizona-based Watermark manages 52 senior housing communities across 21 states, with a pipeline to bring the total portfolio to 60 U.S. properties by 2020. About four years ago, Watermark formed a joint venture with China-based insurance company Taiping, to help develop and manage senior living projects in that country.


It was through this Chinese venture that Watermark was first connected with Keppel, about a year ago, Watermark Co-Founder and CEO David Barnes told Senior Housing News.

“Keppel is a very impressive company, celebrating their 50th anniversary,” Barnes said. “They want to learn senior living from us, but we’ll learn a lot from them … their CEO [Loh Chin Hua] is one of those guys, you have a conversation with him and you think, it’ll be really cool to have access to that brainpower.”

Barnes and Watermark Chairman David Freshwater started the company in 1987, opening a community in Tucson with independent living, assisted living and memory care. Freshwater and Barnes initially thought this community would be operated by a third party, but ultimately opted to form a management company themselves.


The two men eventually found an equity partner in renowned businessman and billionaire George Kaiser, chairman of BOK Financial. Their senior living company, known as The Fountains, grew to 19 communities. Sunrise Senior Living and Arcapita bought that portfolio in 2005, and Kaiser made his exit. However, one community ultimately fell out of that deal and there were a few other third-party management contracts that were not included, and those properties formed the basis of Watermark Retirement Communities.

Since 2005, Freshwater and Barnes have been bootstrapping the company. They see the partnership with Keppel as similar to the partnership they had with Kaiser, and they believe it will enable expansion and create more long-term stability for Watermark, Barnes said.

“As we’ve been growing, more deals have come our way, and our partners have been understanding of how much [equity] we can put in,” he said. “They’re often looking at 10%, and these investments can be quite large … Keppel is interested in putting capital to work in the U.S., so we won’t have to use all our own capital.”

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Indeed, Watermark is still primarily focused on growth in the United States. Keppel is interested in investing here, where senior living is more mature than in Asia, while they also learn about the industry for potential projects closer to their home base of Singapore.

“As a solutions provider for sustainable urbanization, Keppel is well placed to expand our capabilities into the senior living sector with a view to offering customized solutions to Singapore and other markets in Asia,” Loh said in a press release issued Thursday.

Barnes expects that Watermark and Keppel will have more detailed discussions about potential target markets and operating models in China and throughout Asia. A variety of other international opportunities certainly exist, he said, noting that Watermark has already been approached about projects in locations such as Brazil and the United Kingdom.

There are no specific targets for how large the Watermark portfolio will become, Barnes said. However, the company is “extremely scaleable” in terms of systems and processes that have been put in place, and is opportunistic in its approach to acquisitions.

Despite the fact that Keppel is publicly traded on Singapore’s SGX, Barnes also does not expect that Watermark will be under pressure to hit quarterly financial performance targets or face unreasonable expectations for the rate of growth.

“There are certainly experiences out there where you’ve seen companies grow too quickly, so there are a lot of cautionary tales about that,” he said.

In general, Watermark likes markets with a high barrier to entry and communities with multiple levels of care. Notable projects include a highrise in Brooklyn currently in the works, and a recently opened Tucson community that includes an on-site stable of horses for equine therapy.

The Keppel transaction is expected to happen in three stages, with the first tranche of the acquisition expected to be completed by April 2019.

Written by Tim Mullaney

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