Covenant Communities Inc., a newly formed nonprofit, has acquired a 14-property senior living portfolio from Capri Senior Communities, one of the largest providers in Wisconsin.

The transaction keeps the portfolio in familiar hands, though. Capri will continue to manage the communities, while Covenant’s board is chaired by former Capri COO Glen Choban.

“[The deal] keeps things stable from the standpoint of residents and staff, and we just saw it as a win-win situation,” Choban told Senior Housing News. After starting his career on the skilled nursing side, Choban spent nine years with Capri before stepping down from the COO position in 2017.

Capri, based in the Milwaukee suburb of Waukesha, was founded in 1992. Currently, the company operates 23 communities in Wisconsin. The Covenant portfolio includes sites in Milwaukee, Waukesha, West Allis, Germantown, Sturtevant, Fond du Lac, Sun Prairie and Whitewater.  It represents about 55% of Capri’s managed portfolio, but that proportion will go down as Capri currently has projects in development, Choban said.

Founder Jim Tarantino has had an ownership stake in all the company’s properties, including the 14 sold to Covenant. The deal came together thanks to a variety of factors, according to Choban.

For one thing, the timing was right for Tarantino and his co-investors to be bought out; simultaneously, Capri was seeing a lot of interest in the properties from potential acquirers. These parties were attracted to the size and characteristics of the fully-stabilized portfolio, which includes 14 buildings on nine campuses and is about 55% independent living, with the remainder being assisted living/memory care. Capri’s basic model is “mid-market, private-pay,” but the portfolio is diverse, Choban said.

“The portfolio ranges from one standalone, 14-unit affordable housing community to 150-plus unit independent living senior living communities,” he said. In addition, each property is individualized to fit into its locality, so each building looks unique. In keeping with this philosophy, the communities also do not bear the Capri brand but have names such as “Gables of Germantown” (pictured above).

Despite the interest from a pool of interested buyers, having, say, a real estate investment trust (REIT) acquire the properties did not seem like the best move to the Capri team.

“I think Wisconsin is a state that values local ownership in businesses, and so I think it’s something that we looked at from an overall strategy, and rather than having a REIT acquire the properties … there’s a good synergy between Covenant and Capri,” Choban said.

Another consideration: current favorable financing rates. The acquisition was funded through long-term, tax-exempt bonds. Covenant raised about $160 million in bonds, which will also provide capital for some improvements to the buildings themselves, Choban said.

“There was a very positive reaction in market in terms of selling bonds,” he said.

In addition, while Capri is a for-profit company, it has been committed to having affordable housing as a piece of the business, and this is something that will Covenant will be able to keep supporting as a nonprofit owner.

The transaction is closed, with all the individual assisted living facilities having been re-licensed under Covenant. Going forward, it’s possible that Covenant would consider further acquisitions, including of communities not managed by Capri—but this is not an immediate goal, according to Choban.

“We’re just trying to get our feet on the ground with this transaction and get it transitioned well, and we’ll look at what other opportunities come down the road,” he said.

Personally, despite having retired from Capri, Choban is happy to be playing a leadership role with Covenant.

“It was just an opportunity to stay engaged on a longer-term basis in senior living,” he said. “It’s a long-term passion of mine, and I saw this as a good opportunity to stay in the business.”

Written by Tim Mullaney