Real Estate Alert: REIT Pitching Large Senior-Living Portfolio

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Ventas is shopping eight senior-housing properties in six states with a combined value of roughly $400 million.

The portfolio, which is being pitched to value-added investors, encompasses 1,182 units in Arizona, California, Kentucky, Massachusetts, Tennessee and Texas. At the estimated value of $338,000/unit, a buyer’s initial annual yield would be in the vicinity of 6%.

Ventas, a Chicago healthcare REIT, has given the listing to Newmark, which is accepting bids on properties individually or in any combination.

Occupancy rates are 70-93%, with a weighted average of 82%. The average in-place rent is $5,050 — about 17% below the going rate, on average, for comparable properties in those markets, according to marketing materials.

The pitch is that a buyer could boost income by implementing resident recruitment and retention programs. The buildings, which were developed between 1986 and 2010, also could benefit from renovations to unit interiors and common areas.

Most of the apartments (1,105) are configured for independent living or assisted living. The rest are “memory care” units, which usually command higher rents. The facilities are managed by Atria Senior Living of Louisville, Ky., but a buyer could bring in new management and rebrand any or all of the properties.

The portfolio is made up of:

Atria Park of Sierra Pointe, at 14500 North Frank Lloyd Wright Boulevard in Scottsdale, Ariz. (216 units, 81% occupied, opened in 2000).

Atria Canyon Creek, at 440 Independence Way in Plano, Texas (213, 88%, 2009).

Atria Cinco Ranch, at 24001 Cinco Village Boulevard in Katy, Texas (184, 93%, 2010).

Atria at the Arboretum, at 9306 Great Hill Trail in Austin (172, 70%, 2009).

Atria Encinitas, at 504 South El Camino Real in Encinitas, Calif. (117, 74%, 1986).

Atria Marina Place, at Four Seaport Drive in Quincy, Mass. (110, 75%, 1999).

Atria Weston Place, at 2900 Lake Brook Boulevard in Knoxville, Tenn. (86, 88%, 1993).

Atria Summit Hills, at 2625 Legends Way in Crestview Hills, Ky. (84, 80%, 1999).

The portfolio’s net operating income has fallen 7% in the last two years amid declining occupancy in the senior-living sector. The overall occupancy rate among assisted-living facilities dropped to 85.4% at the end of the third quarter, from 90.4% in 2006, according a recent report from Kroll. Among independent-living units, occupancy has held steady at about 90%, but that still lags conventional multi-family housing.

With the number of Americans 65 and older growing rapidly — from 52 million in July 2018 to a projected 73 million by 2030 — developers have produced a glut of independent- and assisted-living properties in recent years, Kroll noted. But fewer older Americans are moving into senior housing than had been projected, whether because they prefer to remain in their own homes or are deterred by the high cost of assisted living. On the plus side, Kroll noted that the average rent among assisted-living properties increased 2.3% during the year ended Sept. 30, and 3% among independent-living communities.

Ventas, one of the largest owners of senior housing in the U.S., said in its third-quarter earnings report that occupancy among its senior-living properties has declined year-over-year for 17 consecutive quarters. Its net operating income fell 5% from the year-earlier period to $152.6 million.

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