Seniors Housing Portfolio Attracts $70M Loan from Prudential Mortgage Capital

Prudential Mortgage Capital Co. has footed $70M for a joint venture by two seniors housing communities to build a five-property portfolio, seeing increasing demand for senior housing as an opportune time to invest in such projects.

By Barbra Murray, Contributing Editor

Lending is available for the right kind of properties, and a five-property portfolio owned by CNL Healthcare Trust Inc. and Sunrise Senior Living Inc. clearly fit the bill for Prudential Mortgage Capital Co. The mortgage lender provided the joint venture partners with a $70 million loan to finance the group of seniors housing communities.

CNL and Sunrise formed their joint venture in late June, with CNL brining $57 million to the table and Sunrise contributing its ownership interest in seven senior living properties.

The five recently refinanced assets account for an aggregate 517 units at independent living, assisted living and memory-care facilities, predominantly located in core metropolitan markets in the western, eastern and mid-western regions of the country. Sunrise of Gilbert, sited just outside of Phoenix, Ariz., in Gilbert, is the largest of the properties with 144 independent, assisted-living and memory-care units. Sunrise at Fountain Square in the suburban Chicago town of Lombard, Ill., offers the same accommodations with 142 units. Two Louisiana properties were also part of the deal: the 72-unit Sunrise of Metairie in Metairie, and the 79-unit Sunrise at Siegen in Siegen, both of which provide assisted-living and memory-care services. And rounding out the group was the 80-unit Sunrise of Louisville, another assisted-living and memory-care property.

“The increasing demand for senior housing combined with the high quality of these properties located in and near major metropolitan areas make this an attractive transaction,” said Karen McGinnity, a director with Prudential Mortgage Capital.

Prudential is one of many lenders who are attracted to the seniors housing sector, doling out financing deals large and small. In June, a consortium led by joint arrangers Merrill Lynch, Pierce, Fenner & Smith Inc. and KeyBanc Capital Market provided Griffin-American Healthcare REIT II Inc. with a $200 million unsecured revolving line of credit. Oak Grove Capital recently originated a $10 million bridge loan to refinance a 90-unit assisted living and memory care community in suburban Boston, and commercial real estate services firm HFF arranged a $17.4 million refinancing deal for a 172-unit seniors housing property in Chatsworth, Calif., near Los Angeles.

Undoubtedly, lenders are encouraged by seniors housing’s strong long-term fundamentals–buoyed by the aging baby boomer population–as well as the sector’s ongoing rebound. In the second quarter, annual absorption was 2.3 percent, compared to 2.1 percent in the first quarter, according to a report by the National Investment Center for the Seniors Housing & Care Industry. And the year-over-year comparison is even more notable; in the second quarter of 2011, absorption was 1.7 percent.

“This is now the seventh consecutive quarter where the pace of annual absorption is above that of annual inventory growth, reflecting both solid demand and recently tempered levels of construction,” said Chuck Harry, director of research and analysis at NIC.

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