REAL ESTATE - The California State Teachers Retirement System has made its first investment in old folks’ housing.
It has established a partnership relationship with Newport Beach, California-based Vintage Senior Advisors.
CalSTRS and Vintage have combined to provide $83.3m of equity to the partnership. The fund supplied 90% or $75 million and Vintage invested 10%, or $8.3m.
The Vintage investment came from its three principals of the company: Eric Davidson, Brian Flornes and Vicki Clark, who all formerly with ARV Assisted Living, a major player in the area.
Davidson said: “We have been talking with CalSTRS for the past 18 months about setting up an investment partnership. We think that it will be a big bonus to have an institutional owner like CalSTRS involved in the business of senior housing.”
Vintage did receive some assistance in the money raising for the partnership. It was helped by placement agent/investment bankers Fiduciary Capital and Wetherly Capital based in Southern California.
The investment partnership will be looking at investing in three kinds of senior housing. These are congregate care/independent living, assisted living and housing designed for people affected by Alzheimer’s.
The investment strategy will be to acquire 50% existing properties and 50% to develop new assets. The partnership will have a focus on the western states. It’s main emphasis will be investing in properties in California.
Vintage is about to put its first transaction in escrow. This will be the purchase of an existing asset. The property is a 147-unit assisted living project in Cerritos, Calif. The complex is three years old.
The partnership will have a total capitalization of around $250m. This will be achieved by employing loan-to-value on the portfolio of 65%.
CalSTRS/Vintage will be looking to invest in properties with 80 to 250 units. The deal size range will vary from $20m to $25m. It will look for transactions able to produce leveraged IRRs in the mid teens. This return factors in a seven-year holding period.