Chicago-based private real estate investment management firm Harrison Street Real Estate Capital announced on Tuesday that it acquired a portfolio of 24 senior housing communities in California and Nevada operated by Oakmont Management Group, for approximately $1.2 billion.
Additionally, Harrison Street is selling a 14-property medical office portfolio to real estate investment trust Healthpeak Properties (NYSE: PEAK) for $371 million. The MOB properties are located in California, Illinois, Minnesota, New Jersey, Oregon, Texas and Virginia, and total 830,000 square feet.
Half of the Oakmont properties were owned by Healthpeak, which is close to completing its plan to sell its rental senior housing assets for up to $4 billion. The other senior housing properties are being acquired from Gallaher Companies.
The Healthpeak communities are four years old, on average, with a stabilized occupancy rate of 96% from 2016 to 2019, and located in affluent markets such as Escondido, Alameda, Fair Oaks, San Jose, Huntington Beach, and Montecito.
The Gallaher properties are either recently built or under construction, in markets such as Novato, Sacramento, Fullerton, Simi Valley, Stockton and Oxnard. Harrison Street likes the demographic trends in all of the markets involved in the acquisition and the portfolio is poised for long-term growth as the industry exits the pandemic.
Having a quality operator in Oakmont in place was a central component to the deal, and Harrison Street involved the Windsor, California-based provider early in the discussions, Chief Investment officer Michael Gordon told Senior Housing News.
“Central to our senior housing investment thesis is alignment with best-in-class operators and developers, and, thus, it’s mission critical to ensure that our operators navigate the process of both evaluating an opportunity and consummating a transaction from day one,” he said.
The average age of the portfolio was another attraction for Harrison Street. That, combined with Oakmont and the former owners’ emphasis on capital expenditures, resulted in very limited capital needs over the next few years.
“Regardless, we evaluate large capital projects on an annual basis, and we emphasize ongoing CapEx projects to ensure the optimal environments for our residents and staff, and our competitiveness within our respective markets,” Gordon said.
Oakmont expects a seamless transition in ownership, Kevin Tyler, CFO and chief investment officer, told SHN.
“[We are] looking forward to continuing [our] history of operational excellence with the Harrison Street team,” he said.
Harrison Street has been busy on the acquisition front in 2021. In February, the firm acquired 12 communities from Healthpeak, formerly operated by Atria Senior Living, in a $312 million, off-market deal where the company was able to “handpick” the properties it acquired.
In December 2020, Harrison Street reportedly raised $720 million for a new investment fund for senior housing, along with life science and data center real estate. The fund, with a $1.5 billion target, could close with up to $2 billion in commitments.
Healthpeak is streamlining its portfolio to focus on medical office buildings, life science real estate and its portfolio of continuing care retirement communities, which have high barriers to entry that cannot be duplicated in their markets.
The Denver-based health care REIT announced $1 billion in rental senior housing sales in the first quarter of 2021, and previously sold $2.5 billion in assets during the fourth quarter of 2020.
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