Earlier this month, Clearwater Living acquired four LivGenerations communities in the Phoenix area. New information shows the deal changed hands for a relatively high total compared to other similar deals.
Newport Beach, California-based Clearwater Living and capital partner PGIM paid $225 million to buy multiple Arizona properties consisting of 554 units from Liv Communities, as reported by commercial real estate publication CoStar News. CoStar cited internal data that shows the transaction “is the highest total price on record” for a senior living portfolio in Arizona.
With Liv Communities making its exit from traditional care-based senior housing, Liv Communities CEO Scott Brooks told Senior Housing News the company plans to launch an active adult brand, Liv+.
“As we exit the traditional senior living space, in addition to continuing to grow our conventional Liv multifamily portfolio of communities, we are enthusiastic about launching a new offering, Liv+, focused on active 55+ adults,” Brooks told Senior Housing News.
Clearwater acquired the communities in the Phoenix area to increase its footprint in the region and grow its “Class A trophy” holdings.
“The reason why this portfolio was so attractive to us was not only the alignment of the style of the communities … but also culture alignment,” Clearwater Living President and COO Danielle Morgan told Senior Housing News earlier in November. “Acquisitions can be really tough when you’re having to make a change and a shift in culture. [In this case], the alignment was already there.”
Clearwater’s acquisition comes as the company looks to expand in markets in southern California, Phoenix, Reno, Nevada and other parts of the western U.S. The company currently has 318 units under construction at a site in California, with more openings planned next year and in 2024.
The portfolio’s acquisition price is notable compared to other recent senior housing portfolio transactions. For example, while it only covers four communities, the $225 million total is about half of what real estate investment trust (RET) Welltower (NYSE: WELL) paid for a portfolio of 33 StoryPoint Senior Living communities.
In 2021, overall investment sales volumes approached $19 billion in 2021, the strongest investment cycle since 2015, according to market research firm Colliers.
Due to high construction costs and debt financing getting harder to obtain, investors may increasingly look to find high-performing assets, and setting the stage for a buyers-friendly market in the coming decade. Operators are grappling with the high costs of daily business, like food and labor. At the same time, interest in senior living development is rising, meaning more companies are opting for new builds rather than seeking an acquisition target.
All of that is helping to make conditions more favorable for buyers of properties by driving down pricing for existing assets.
Nearly 40% of all senior housing occupancy lost in the pandemic came back as of September, a National Investment Center of Seniors Housing and Care (NIC) report showed. Occupancy has recovered during five consecutive quarters as stabilized occupancy rose 1% in the third quarter to 82.2%.
Demand for stabilized assets is also heightened by the lack of new construction across key markets in the U.S. NIC data showed in the second quarter that 35,000 units were under construction in 31 primary NIC Vision markets.
But that’s not stopping some from predicting a favorable construction climate in 2023. In June, the Weitz Company released its Senior Living Construction Costs report that estimated that construction prices would “level off” in 2023 and pair with a mindset shift from surviving the pandemic to planning for the future.
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