Harrison Street funds buy into US senior housing

Harrison Street Real Estate Capital has entered into a joint venture with The Shelter Group’s Brightview Senior Living to invest in senior housing in the US.

Harrison Street has already provided $520m (€395m) in capital to buy 11 senior housing properties in East Coast markets Baltimore, Boston and Philadelphia.

The investment was made on behalf of two funds. Harrison Street Core Property Partners, a $2bn open-ended fund, has provided the capital for eight of the assets, which are core properties with average occupancy of 96%.

Harrison Street Real Estate Partners IV, a $750m closed-ended fund, provided the capital for the remaining three assets, which are undergoing improvements and have an average occupancy of 82%.

“The cap rates on these two portfolios will be different,” said Christopher Merrill, co-founder and president of Harrison Street.

“The core assets will have returns of 6.5% to 7%. The opportunistic portfolio is projected to have cap rates that are 100 to 150 basis points higher than the core assets.”

Merrill added: “This is a very high quality portfolio that we are investing in. We are replacing a large institutional investor that Brightview had a joint venture with previously.” He declined to name the investor.

Merrill said he was “hopeful of doing a lot more business” with Brightview in the future. “On any transaction for the venture, both parties must agree before a closing can occur,” he said.

Harrison Street also sold a healthcare portfolio in the US for $283m to an unnamed buyer.

There are a total of 12 properties located in Florida, Texas, Nevada, Oklahoma, South Carolina and Indiana.

The assets included seven medical office buildings, three inpatient rehab hospitals and two short-term acute care hospitals.

It took Harrison Street four years to accumulate the portfolio. These assets were acquired by the real estate manager’s commingled fund, Harrison Street Real Estate Partners III. The investment fund had a final closing of $596m in June 2011.

Brian Mutchler, senior vice president at Harrison Street, said: “We felt that the lack of quality healthcare portfolios in the market in 2014 made an offering of this size and quality extremely desirable and guaranteed to be highly sought after by institutional investors.”