A senior living investment company is expanding its reach with the announcement of a new, privately-traded real estate investment trust (REIT) that will create better leeway in navigating senior living investment, according to 1031 Crowdfunding CEO Edward Fernandez.

On Thursday, 1031 Crowdfunding announced the launch of the Covenant Senior Housing REIT, Inc, which aims to create new ways for senior living investors to grow their holdings.

The newly-formed REIT stands as its own company, and 1031 is the REIT’s sponsor. With the launch, 1031 Crowdfunding is focusing on “exchange-type vehicles” and working with investors interested in “non-correlating assets who want to invest in senior housing,” Fernandez told Senior Housing News.

Total asset value of the REIT is currently $51.25 million with 89% occupancy across three properties in California and Oregon. The REIT will concentrate on secondary markets across the country in an effort to bring returns to investors.

That focus on secondary markets stems from cap rates and yields within a given location, and driven by high interest rates, the REIT must “ensure that the opportunities we offer have a cash flow that makes sense to investors,” Fernandez said.

“In a REIT, you don’t have those restrictions so you can refinance, you can buy value-add and you can buy opportunistic. You have better leeway to navigate any situation or to create opportunity, which makes the structure a lot easier to work with as a sponsor,” Fernandez wrote in an email to SHN.

1031 Crowdfunding uses an online marketplace where real estate investors can search, review and purchase a variety of investment-grade properties in a structure known as a Delaware Statutory Trust (DST) that allows investors to defer taxes on a property sale.

The launch of the private REIT is part of the company’s plan aimed at “creating diversity when it comes to product mixes,” Fernandez said. With turbulence remaining in the marketplace due to high interest rates and a murky outlook, Fernandez said the private REIT structure is a different way for investors to transact.

“So the value proposition is we’re now approaching those investors looking for those non-correlating assets, are tired of the market volatility, and are looking for more stability,” Fernandez said.
In an October episode of the SHN Transform podcast, Fernandez outlined 1031 Crowdfunding’s plan of building a $5 billion pipeline of assets under management, with approximately 40% of that value stemming from senior living investment.