Canada’s Chartwell Buys JV Partner’s Half of U.S. Seniors Housing Portfolio for $110.5M

May 19, 2010
By Barbra Murray, Contributing Editor

Mississauga, Ont.-based Chartwell Seniors Housing Real Estate Investment Trust can claim full ownership of a six-property senior housing portfolio in the U.S. now that the company has closed the $110 million acquisition of its joint venture partner’s 50 percent ownership stake in the high-quality assets. Chartwell’s deal with its partner, ING Real Estate Investment Management Australia PTY Limited, called for the REIT to plunk down $35.8 million in cash and assume $74.7 million in existing debt on the properties.

Encompassing an aggregate 1,057 units, the Meridian Portfolio consists of five properties in the Denver area and an additional property in Temple, Texas. Chartwell and ING had owned the group of independent living and assisted living facilities, known as the Meridian Portfolio since 2005, when they teamed up to acquire the assets for $232 million. The joint venture relied on $160 million in non-recourse mortgage financing to fund most of the purchase. As per terms of the new transaction, Horizon Bay Chartwell, Chartwell’s U.S. joint venture property management firm, will continue to manage the Meridian Portfolio.

While the senior housing sector in the U.S. fared better than most commercial real estate sectors during the economic downturn, it did not gone unscathed and it has yet to fully recover. As per a report by the National Investment Center for the Seniors Housing & Care Industry, the average occupancy level for independent and assisted living properties declined from 88.3 percent in the fourth quarter of 2009 to 88 percent in the first quarter of 2010. And while rent growth continued, its pace slowed; year-over-year rent growth dropped from 2.6 percent in the first quarter of 2009 to 1.5 percent in the first quarter of this year.

Despite the drop in occupancy levels and the rate of rent growth, analysts are still very bullish on the seniors housing sector. “Seniors housing offers investors attractive opportunities over the long term, as well as during the recovery, as sentiment becomes less cautious,” the Prudential Real Estate Investors’ Investment Research Department notes in a recent report. “The rapidly rising population of the relevant age cohort will increase demand for seniors housing as the decade progresses, which will boost demand for units and push rents higher, particularly if supply does not rise to meet the demographic challenge.”