BDT & MSD Expands Into Senior Housing With $7.5B Development Pipeline Buy
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BDT & MSD is making a big bet on senior housing, with its majority stake acquisition of Sunrise Senior Living from the Public Sector Pension Investment Board. For the company, which has been focused on hospitality and multifamily, this marks an expansion into a sector it sees growing demand for due to demographic shifts.
Through the Sunrise platform, it operates more than 230 communities in both the U.S. and Canada, with more than 22,000 residents present. The development pipeline, at an expected cost of roughly $7.5 billion, includes 50 more communities.
The definitive agreement, which did not reveal the transaction price, is expected to close next year, subject to customary regulatory approvals.
BDT & MSD's History Of Managing Real Estate
For decades, BDT & MSD has been investing in real estate. Its hospitality and multifamily assets include Four Seasons Hualalai, Four Seasons Jackson Hole, Naples Beach Club and The Boca Raton. It also has Knox Street in Dallas in the pipeline, which will open soon and deliver a 186-unit apartment tower among other real estate uses to the market.
The Sunrise platform is known for its quality approach that provides a premium experience to residents, according to BDT & MSD. While senior living hasn't been a major concentration, BDT & MSD is betting that its history with residential and hospitality can complement Sunrise's growth.
"Sunrise is guided by a singular purpose: championing quality of life for older adults by creating environments that support longer, healthier, and happier lives," Jack R. Callison, Jr., CEO of Sunrise Senior Living, said in a statement.
He added that BDT &MSG "share our values and our commitment to the residents and families we serve. Together we will continue to invest in our people, our culture, and the resident experience as we bring Sunrise's approach to lifestyle, wellness, hospitality and care to more families."
At A Time When Occupancy Averages Over 90%
Sunrise, whose leadership team, including Callison, will remain in place after the pending closure of the transaction, sees growing demand for high-quality senior living assets. This is driven by demographic shifts as the population ages.
In fact, a recent report by National Investment Center for Seniors Housing & Care revealed that occupancy in the sector averaged 90.4 percent in the third quarter in the 31 primary markets, up from the 89.8% posted in the previous three-month period. This marked the 21st straight quarter of gains in the category, as demand continues to outpace deliveries.
The top three best occupancy markets were Boston (94 percent), San Francisco (93.3 percent) and Minneapolis (92.7 percent).
Also, Sunrise has a joint venture investment platform with a third-party management unit.
For BDT & MSD, this is an opportunity to expand into a sector with attractive fundamentals, while bringing over adjacent real estate experience in hospitality and multifamily in hopes of providing the platform a boost.
Now, it's about seeing what BDT & MSD can bring to the table to advance the next phase of Sunrise's growth.
PSP Investments was advised by J.P. Morgan Securities LLC and Jones Lang LaSalle Securities, LLC on the deal.
Source: GlobeSt/ALM