Orlando, Florida-based Bridge Investment Group expanded its senior housing portfolio earlier this week with the acquisition of both the real estate and operations of Somerby Senior Living.
The acquisition was completed through Bridge Seniors Housing Fund Manager, a $1 billion fund Bridge raised last year.
Prior to the deal, Birmingham, Alabama-based Somerby owned and operated nine properties in prime markets across the Southeast, and its 94% overall occupancy rate is far above the industry average. Bridge was interested in Somerby’s real estate for some time, Bridge Seniors Housing Fund Manager CEO Robb Chapin told Senior Housing News. A deeper look into Somerby’s operations spurred Bridge to complete the deal.
“Senior housing runs on a real estate chassis,” Chapin said. “But operations is the engine which makes it run.”
Leverage for future acquisitions
The Somerby acquisition allows Bridge the opportunity to offer a more vertically integrated property management model across its senior housing portfolio. With the deal, Bridge now owns 90 properties across the country. Chapin believes the acquisition gains Bridge some operational optimizations, and gives the firm a negotiating advantage in future acquisitions. Investors like Bridge have been in something of a bind in recent years, when it comes to seeking operating partners.
“There is somewhat of a deficiency in the market of high-level performance and operating standards,” Chapin said. “It’s a symptom of operators looking to serve many masters and spreading themselves thin.”
Up to this point, Bridge has not owned an operating company but has worked with third party operators. With the Somerby platform, Bridge is looking to learn and transfer some best operating practices across its portfolio. Chapin is particularly impressed with Somerby’s sales and marketing initiatives, and identified lease-ups as an area where Bridge can immediately benefit once the dust has settled on the deal. Bridge plans to transfer some of Somerby’s other core competencies, such as ability to handle high acuity and care, where it feels most appropriate.
The firm’s operating philosophy, dubbed “Spark,” is intentionally designed to encourage education and growth, foster community and new relationships, and establish and support positive life choices through activities, community events and outings, and educational opportunities.
Bridge may even have Somerby evaluate the operations of its third-party operator network, and the investment firm will continue to work with third-party operators in future acquisitions, Chapin said.
“We’ve always maintained that deploying capital at our scale is done using high-quality, capable operators,” he said. “We like to have diversification in our portfolio.”
Positioning Somerby as a national platform
The deal opens the possibility of Somerby — which employs 20 corporate-level executives and over 1,350 employees at its communities — becoming a national platform. For now, Chapin and Somerby President and CEO David Grady are content to let the company continue to be a regional player. The immediate goal is for Somerby to continue its current operations, to ensure no disruption.
Once that is completed, Bridge will look at ways to expand Somerby’s southeastern footprint. But Chapin is not in a rush.
“We see Somerby as an important part of creating value within our existing portfolio, how we evaluate any property moving forward, and integrating properties we acquire,” Chapin said. “This can deliver better returns for our investors and a better living environment for our residents.”