REAL ESTATE - Pramerica Real Estate Investors has put together a joint venture with Sunrise Senior Living to construct senior living properties in the United Kingdom.
Jonathan Short, managing director and head of the group’s European merchant banking team, said: "We think there is a great demand for new senior living projects in the UK. This is certainly the case for central London. Other areas we will be looking at are Wales, Ireland and Scotland."
There are certainly numbers to back up his claim. According to the UK.’s Office of National Statistics, the number of people over the age of 85 is on the upswing. This age group grew by 60,000 in 2006. It’s projected to grow by 20% in five years and 35% over 10 years.
The joint venture will be developing mostly traditional assisted living communities. Most of the projects will have a range of 80 to 90 units.
Short sees that some of the developments could have a commercial real estate component and be in varied locations.
He said: "We will be constructing some properties that will be mixed-use. There is a possibility some will have an office and retail space associated with them. We are looking at sites that are in an urban or suburban location."
There will be a total capitalization of $500m(€387m) in sterling pounds for the joint venture. There is a debt to equity ratio of 80% to 20%. The $100m of equity is split with $80m coming from Pramerica and $20m from Sunrise. The ownership split of any properties in the venture will follow along the same lines as the equity contributions.
Sunrise is the development partner in the JV, but both companies must agree for any transaction to happen. There are no assets in the venture at this time. There is a three-year investment period to find all of the investments for the venture.
Pramerica made its investment in the JV for its commingled fund, PRECO III. This will be the commingled fund’s first investment in senior living properties. The real estate manager raised a total of $700m of equity for the fund. Money raising was completed in July of last year. One of the investors was the California Public Employees Retirement System with a $100m commitment.
Pramerica had marketed PRECO III as an opportunity fund. This means that it will be looking for leveraged IRRs north of 20%.