Marcus & Millichap Leads Record Senior Housing Portfolio Sale

Regency Post-Acute Healthcare System completed one of the largest senior housing portfolio sales on record in the state of Texas.
Windsor Calallen, one of the four Corpus Christi facilities sold in the portfolio transaction.

Windsor Calallen, one of the four Corpus Christi facilities sold in the portfolio transaction.

Dallas—Marcus & Millichap‘s Institutional Property Advisors (IPA) division has announced a new record for the Lone Star State with its closing of  the largest senior housing sale on record in Texas. The senior housing portfolio consists of 33 skilled nursing facilities, about 4,200 licensed beds and some land for further construction in South Central Texas.

IPA‘s Joshua Jandris, Mark Myers, Peyton Stanforth and Charles Hilding represented the seller, Regency Post-Acute Healthcare System, and found the buyer, Capital Senior Ventures. Marcus & Millichap’s broker of record in Texas is Timothy Speck.

Jandris said the buyer asked not to disclose the transaction price for the deal.

The seller, Donald Kivowitz is the founder & chairman of Regency, which manages more than 120 partnerships and corporations. He said that this portfolio has been built over 26 years, and includes a therapy company, consulting company, construction company and a pharmacy. The 33 facilities had 4,300 employees caring for 3,800 seniors and sick people.

“We incorporated a skilled unit for rehabilitation where we provided services for patients who came in anywhere from two weeks to two months after hip and knee replacement surgery,” Kivowitz said. “Regency constantly focused on good patient care.”

The company’s total involvement in the portfolio is likely what allowed it to achieve a record transaction value, Jandris said. “There are companies with more beds and more buildings that have sold, but perhaps the reason we were able to get the value we did was that Regency not only built their buildings, they owned them, operated them, handled every facet of the business and touched every base within their space, and that created a lot of value,” he explained.

Facilities in the portfolio included six in the Austin Area, four in Corpus Christi, six near Victoria, four in the Houston area, 10 in the Rio Grande Valley and three in the San Antonio area, according to the Dallas Morning News.

Harlingen Nursing Center, another property sold in the portfolio transaction.

Harlingen Nursing Center, another property sold in the portfolio transaction.

Myers, the executive director of IPA, added that this is one of the largest portfolio sales of skilled nursing facilities since HCR ManorCare’s $6.1 billion portfolio sale to HCP in 2011.

Jandris said he and Myers closed more than $4 billion in long-term care and senior housing assets over the last 20 years. For this transaction, they brought Regency several different buyers, including a family office, publicly traded REIT, privately traded REIT and a private equity fund, and were able to immediately get three offers.

This transaction reflects the larger demand for new senior housing that the market expects to see in the coming years. According to Jandris, senior housing demand will increase by nearly one million units over the next 25 years as 10,000 people are turning 65 years old every day. Additionally, the age group of 87 and older is going to grow by nearly 20 percent from 2015 to 2025. “These numbers are important for senior housing and commercial real estate because senior housing and long-term care is a need-driven model,” Jandris told MHN. He added that for investors, senior housing trades at a higher capitalization rate and oftentimes at a higher price per unit than traditional real estate asset classes.

“We envision a lot more traditional commercial real estate investors starting to move into or explore our space not only from a demographic standpoint, but also because the returns on investment are stronger,” he said.

He added that senior housing in Texas is particularly strong because the state doesn’t have a state income tax, making it an attractive retirement destination.

Photo courtesy of Marcus & Millichap.