Real estate development and management firm Lloyd Jones is pivoting in a big way by selling most of its multifamily portfolio and deploying those dollars in senior living communities.
The company plans to dispose of about 80% of its multifamily holdings while at the same time rapidly expand its holdings in the senior living industry, according to Lloyd Jones COO and EVP of Senior Housing Tod Petty.
“It’s a great time to sell those,” Petty told Senior Housing News Tuesday. “We’re going to deploy all the dollars back into the senior space.”
The company currently has about 40 assets under management — including a handful of senior housing communities — with a portfolio totaling about $1 billion in value.
‘The right time’
Underpinning the Miami-based company’s philosophy is a cross-current of two trends. The first is that low cap rates and other economic conditions have made multifamily properties valuable in the eyes of investors, with some complexes changing hands at double their initial value. At the same time, senior housing communities are selling at discounted prices compared to replacement costs.
Lloyd Jones CEO Chris Finlay saw similar market conditions in 2008, and in hindsight Petty said “his greatest regret … was not buying everything he could.”
“He’s waited for the right time on the senior side, and he believes the time is now,” Petty said.
The company has a goal in 2022 of acquiring 2,000 senior living units, and while it has closed on just three acquisitions this year so far, Petty said more growth is on the horizon. Currently, Lloyd Jones has a dozen senior living projects open or in pre-opening stages, and six more acquisitions in the pipeline.
The company’s acquisition strategy hinges on acquiring communities on a low basis — maybe a Class A property that is stuck in lease-up with 70% occupancy — and converting them into middle-market properties with monthly rates around $3,500.
“Because we have an interior designer, a development team and a construction manager, we can go in and not spend all this money we would with premium third-party vendors,” Petty said.
That strategy differs from other middle-market senior living companies, which are looking for efficiencies in staffing to make their models work, according to Petty.
So far, the company has found many suitable communities for acquisition deals — primarily belonging to real estate investment trusts (REITs), according to Petty.
“REITs want to dispose of them, because they’re not really positioned to do capex infusion and repurpose the asset,” Petty said. “We’re getting them at a very low basis, which is the most important factor in getting a lower rent.”
Lloyd Jones is also targeting senior living communities in the Sun Belt, Midwest and Mid-Atlantic with storied histories. For example, the company for about $8 million recently acquired from National Health Inventors (NYSE: NHI) Maybelle Carter, a 131-unit, senior living community in Madison, Tennessee. The community is famous for its connection to country music legend Johnny Cash, and it’s built on the former estate of country music legend “Mother” Maybelle Carter.
Lloyd Jones plans to spend about $5 million renovating the property by adding new finishes, outdoor patios and an heirloom display room with selected memorabilia from the Cash and Carter family on display.
With the acquisition, the community will operate under Lloyd Jones’ middle-market Sage Hill brand as Sage Hill Maybelle Carter. The company also added two other communities to its Aviva senior-living portfolio in February: Aviva Woodlands in Lincoln, Nebraskal and River Bend in Rochester, Minnesota.
Looking ahead, Petty said the company’s Aviva portfolio will only include acquired Class A properties and newly developed communities that aren’t being undertaken with a partner. For its middle-income Sage Hill brand, Lloyd Jones will focus on repurposing distressed assets and redesigning them into more affordable assisted living and memory care communities.
Small or mid-sized senior living operators could also be a growth ventor for Lloyd Jones, and Petty foresees a future where the company would acquire or partner with such a company.
“We can come in, joint venture with them or bring them under our platform … keep their quality people and take over the properties, we’re definitely interested in growing that way, as well,” Petty said.
The company is also growing a hotel division, with plans to grow the portfolio and eventually manage those assets in-house. But that endeavor could also result in more growth on the senior housing side, as well.
“The windfall to that is that we get to see these distressed hospitality assets,” Petty said. “Our development team is looking and underwriting now acquisitions to repurpose for senior housing.”
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