For operators looking to own their own facilities while minimizing the amount of capital committed to construction, Lancaster Pollard offers a program that may help them do just that. Launched in 2012 and led by Craig Jones, LP’s Propero™ Senior Housing Equity Fund has provided a total of $88 million in gross investments spanning across the acuity spectrum, from IL/AL to memory care to skilled nursing. The way it works is the Fund invests in seniors housing properties as the sole owner and then triple-net leases them to an operator. The operator, therefore, doesn’t have to invest as much equity in the project or acquisition and can then choose from a predetermined purchase option schedule when to acquire the community at a price based on Propero’s investment basis rather than the current fair market value. The buy-back pricing is structured such that the tenant is incentivized to acquire the facility earlier rather than later.
The most recent project under this Fund involved a joint venture between Paradigm Senior Living, the land owners of the site and passive individual investors, for the development of a senior living community in Conroe, Texas. Propero invested approximately $26.7 million to fund the $30 million, or $214,300 per unit, development, with the JV contributing a portion of equity. Construction has already begun and is expected to wrap up in late 2016. Offering 60 IL units, 60 AL units and 24 memory care beds, the community should compete well in the active development market of the area (Conroe is located just north of The Woodlands) with its good location in the growth corridor of Conroe, larger unit sizes and numerous amenities at a competitive pricing structure. Paradigm will manage the community under a 10-year lease with extension options, and the timing of acquisition will be at their discretion as they are made aware of the acquisition price at all times during the life of the project. With approximately $50 million in additional investments engaged today, which should close between Q4:15 and Q1:16, we are sure to hear more from Propero soon.