Crowdfunding Investor Advances Senior Living Strategy With New Acquisitions

An online real estate investment platform is making a splash in senior living over the next five years with a goal of steadily growing its investment holdings in the industry.

The company, 1031 Crowdfunding, recently acquired two memory care and AL communities in St. George and Lindon, Utah, totaling 178 units. The properties are operated by Avista Senior Living, an operator with 16 communities under management.

1031 Crowdfunding currently owns 11 senior living communities in eight states, with plans to expand in the near future by acquiring communities across the care continuum, according to CEO Edward Fernandez.


“What we’re trying to do is gather assets across the U.S.,” Frenandez told Senior Housing News. “We look at the demographics and we’re very bullish within senior living and there’s not enough senior housing out there to handle the growth.”

1031 Crowdfunding is not a typical real estate investment firm. The company is an online marketplace where individual real estate investors can search, view and purchase a variety of investment-grade properties in a structure known as a Delaware Statutory Trust (DST). That structure was approved by federal tax officials in 2004 as an option for investors to qualify for the deferral of taxation on a sale of an investment property.

“We write the check, we gather the debt, we buy the asset and we close the asset within this trust,” CEO Edward Fernandez told Senior Housing News.


The company’s overall goal is to have $1 billion in assets under management in two years and $5 billion in five years, with two-thirds of its investment portfolio in senior living, Fernandez said. Currently, Fernandez added that the company was currently one third of the way to its two-year, $1 billion goal. .

While baby boomers are sure to bring with them a demographic demand wave as they age into senior housing, Fernandez said the industry also is an attractive investment space due to its complexities and barriers to entry.

“You can’t buy an apartment building and think you can jump right into senior housing, and we see very attractive capitalization rates,” Fernandez said.

Cap rates have risen recently as investors have grown more wary of the space due to its uncertainty., Fernandez noted 1031 Crowdfunding was seeing current cap rates around 9%, allowing “decent cash flow” back to investors.

“We will continue to do senior housing as long as the cap rates are there,” he said.

The company has an operating agreement that if net operating income or earnings before interest, taxes, depreciation and amortization hits a certain number, its operating partners can take some of the financial upside.

“Normally, an operator will charge a 4% of 5% management fee on gross revenue where there’s no incentive to push and drive performance,” Fernandez said.

Looking ahead, Fernandez said the company was conducting due diligence at properties in Florida and more properties in Utah, with more growth on the way.

“We were able to weather the storm of this unpredictable pandemic and come out on the other side,” Fernandez said. “Now we’re starting to see everyone wanting to jump into the space.”

That refrain is something that has come up recently as well-positioned investors are able to get good value in new acquisitions. To make investments work in senior living, Fernandez said the key lies in identifying strong operators and developers.

“There’s constant opportunity out there,” Fernandez said. “When interest rates settle down, I think things are going to settle down and it’ll make the space a little easier.”

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