Thanks to a complex transaction that was four years in the making, a distressed Florida continuing care retirement community (CCRC) will have a new owner and manager — and could become a model of modern senior living at a more affordable price point.
“We identified this as an opportunity because it’s kind of been untouchable, this asset,” Richard Ackerman, managing partner of Big Rock Partners, told Senior Housing News. “It’s a large asset, it’s complicated, there’s a lot of different vested interests … it was attractive to us because it’s so complicated.”
The asset in question is University Village, a CCRC in Tampa that has been in bankruptcy since 2016 and drew attention — including from state legislators — due to the related turmoil. Big Rock initially explored acquiring the community in a private transaction, viewing it as a chance to enter the CCRC market for the first time, Ackerman said. Big Rock is a private equity firm that has invested in and managed more than $1 billion in real estate assets, and has over $200 million in senior housing assets.
The complexities of the deal — including the liabilities being assumed, the cost of needed renovations and the cost of the acquisition — made it clear that a conventional transaction would not be feasible, according to Ackerman. Prior to Big Rock, Ackerman was head of the Los Angeles office of private equity giant Apollo Real Estate Advisors, in which role he helped oversee many complex workout situations, including the sale of Summerville Senior Living to Emeritus Corp. He drew on this skillset to navigate the University Village transaction.
The solution was to create a not-for-profit entity, Tampa Life Plan Village, which was formed on Jan. 31, 2020. Working with Chicago-based speciality investment bank Ziegler, the new nonprofit secured tax-exempt and taxable fixed-rate bonds in the amount of nearly $70 million. Ziegler closed on the bonds in late July.
The bonds will be used to fund the acquisition from sellers Westport Holdings Tampa and Westport Holdings Tampa II, as well as long-deferred maintenance and renovations that are needed. The transaction encompasses the independent living portion of University Village, consisting of 445 apartments, 46 villas and common areas.
An adjacent health center, including assisted living and skilled nursing, are not being acquired. The health center was not in bankruptcy but was encumbered by a bank loan, and the parties ultimately were unable to settle on a price, Ackerman said.
Plans are to build assisted living and memory care within the existing independent living footprint. Future residents would pay an entrance fee of $75,000 for a contract that would ensure their care on campus or — if the need should arise — in off-site skilled nursing facilities operated by third parties, Ackerman said. A similar arrangement is in place for current residents, who are occupying 138 units.
Many CCRCs charge six-figure entrance fees, but by acquiring the property at such a low cost, the nonprofit ownership entity will be able to fully update the building with the latest amenities while keeping costs for residents down, according to Ackerman. He termed the offering a “modern middle-market product.” Big Rock’s senior housing portfolio includes several high-end properties, and Ackerman believes that University Village will compare favorably to these types of communities, even if the quality of carpet or wall coverings might not be the same.
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The goal is to start the sales program for the renovated property in May 2021.
The CCRC will be managed by BRP Senior Housing Management, a Big Rock affiliate. In 2017, Big Rock completed the initial public offering for a special purpose acquisition corporation formed with the intention of acquiring a senior housing operating company, but no suitable candidate was identified, Ackerman said. The Big Rock team has the internal operational expertise necessary to manage properties, and will do so on a selective basis, likely for future workout situations. Big Rock is continuing to work with Des Moines, Iowa-based LCS as the operator on its new developments.
“We won’t ever be a large manager,” Ackerman said. “Our main goal is creating value, and the best way to do it was to be hands-on.”
As has been the case across the senior living industry, Covid-19 has taken a toll on Big Rock communities. New leasing has been down, and Big Rock has seen some attrition of residents who are moving out to be with family, Ackerman said. However, he stressed that the firm’s projects are well-capitalized and he has no doubt that they will weather the pandemic.
The same cannot be said for every senior living community across the country, and Ackerman does anticipate that functionally obsolete assisted living and memory care buildings — particularly smaller, single-site communities — will experience distress. These properties could be good candidates for being acquired and repurposed at a more affordable price point. But Big Rock is not targeting these smaller deals, given the firm’s expertise in taking on more challenging opportunities.
“We’re looking for the larger, more complicated type of projects, and they’re there, but probably doing one or two a year is more realistic,” Ackerman said.