Foundry Commercial announced a major acquisition in the seniors housing market, nearly doubling its portfolio and adding another institutional partner in the process. The real estate investment firm teamed up with a fund managed by Morgan Stanley Real Estate Investing (the majority owner in this deal) to purchase 24 assisted living/memory care communities throughout the mid-Atlantic in addition to the portfolio’s operating company, Spring Arbor Senior Living. Multifamily developer HHHunt was the seller, which owned and operated the communities through Spring Arbor.
The portfolio includes three communities in Maryland, nine in Virginia, and 12 in North Carolina, with 1,424 total units of assisted living and memory care. There was one stand-alone memory care community in Richmond as part of the group, but the other MC buildings were part of larger campuses. Building ages ranged from around 10 years old to one year, with a 32-unit MC community opening in 2021 adjacent to an existing community built in 2012 in Fredericksburg. Two others opened in 2019, so three communities were still in lease-up during the pandemic. So, it is a relatively new portfolio with only some work needed under new ownership. However, across the 24 communities, those refurbishments could top $10 million.
Overall, occupancy was in the mid-80s across the portfolio, with some locations in the high-90s, and some not as well occupied. So, there is room for improvement there. Rents were generally above middle-market, depending on the location. At most of the campuses, there is no land for expansion opportunities, but Foundry may reposition some of the units, depending on need.
The off-market transaction was financed by a credit facility provided by Capital Funding, which will also provide funds for future renovation projects. A number the properties had been financed by HUD, with Capital Funding serving as the servicer, so the firm was familiar with the portfolio.
Foundry’s assets now top 50 communities in the seniors housing space, and it previously had no presence in the Mid-Atlantic, until this deal. After digesting this portfolio transaction for a bit, it will look to hopefully grow its relationship with the Morgan Stanley Fund, in addition to its established JV with Fundamental Advisors. That JV has so far announced two acquisitions of seniors housing communities in Florida and Kansas. In addition, Foundry may be interested in acquiring other regional operating platforms in the future, like Spring Arbor. There may be some new development projects coming down the pike as well. We’ll keep an eye out.
