Senior residing operators are in 2025 hungry for brand spanking new investments, however some conventional lending and capital sources have run dry, at the least for now. A brand new crop of traders is stepping as much as fill the hole.
Take Chicago-based Citrine Funding Group for instance. After closing on its first senior residing transaction in 2023, the corporate is deepening its holdings with a plan to speculate about $150 million in new property below administration.
Citrine’s funding thesis rests on bridging the hole between capital companions and senior residing operators. The corporate is concentrated on shopping for turnaround or value-add communities and managing them generally partnerships with third-party senior residing operators.
Citrine Founder and President Lynn Jerath has labored in senior residing for 25 years, and now sees the sector as standing “head and shoulders” above different actual property asset courses because of excessive demand and a low fee of recent development.
“You might have so many operators, so many house owners. You even have so many sorts of property varieties with totally different unit mixes and totally different providers,” Jerath advised Senior Housing Information. “From a strategic trade standpoint, this permits entrants coming in who’re bringing greatest practices … into the senior housing house and innovate, enhance and effectivity, after which consolidate… just like what you’ve seen within the resort trade and self storage during the last 20 years.”
In the meantime, operators are placing their greatest foot ahead to satisfy and work with new capital companions, a lot of that are inexperienced, in keeping with Dennis Murphy, chief funding officer of Fort Wayne, Indiana-based Precedence Life Care. Precedence Life Care launched a $10 million development fund in 2024 to gasoline co-investment in senior residing acquisitions and was meant to construct upon the construction of the corporate’s basis whereas new growth stays constrained.
“They’re much less biased by prior experiences in particular markets and are usually extra open-minded and entrepreneurial,” Murphy mentioned. “Many even have beneficial expertise in scaling companies in different industries, which might translate effectively to a rising operational platform like ours.”
Attracting new capital companions
When Precedence Life Care launched its fund in 2024, the corporate sought to take a small chew of what its leaders noticed as an enormous funding apple.
The corporate began small with a $10 million fund meant to draw co-investors. Doing so created “extra cohesiveness in our contracts” and “traction” that helped the operator share in a number of the worth it creates for its respective senior residing possession teams.
Right this moment, the senior residing operator nonetheless is using its community of operators, builders and lenders to construct new relationships, in keeping with Murphy.
The senior residing operator is seeing “significant curiosity” from household workplace teams, traders which can be sometimes cautious given the complexities of the trade. Whereas Precedence Life Care sees a rising variety of non-traditional capital sources-particularly household places of work, personal funding companies and generalist funds getting into senior housing, many lack the size or infrastructure of established REITs or private-equity companies, in keeping with Murphy.
As such, they’ll’t supply entry to bigger pipelines or portfolio acquisition alternatives, asset-management experience particular to senior housing, buying leverage with distributors or insurers or risk-pooling advantages, akin to insurance coverage or worker advantages applications, but.
Baltimore-based Brightview Senior Dwelling has sought personal fundraising. In 2024, the corporate spun up a $200 million fund to finance the development of eight communities by way of 2026. The funds have allowed the operator to proceed its development plan of constructing 4 new communities per yr.
Sonida Senior Dwelling (NYSE: SNDA) and CEO Brandon Ribar have sought to convey new traders and companions into the fold this yr whereas demand for such investments is rising.
“I’ve heard on a few events at numerous conferences that actually, apart from knowledge facilities, senior residing might be the sector that individuals are most bullish on or simply most keen on throughout actual property proper now,” Ribar advised Senior Housing Information.
Sonida’s technique for attracting new capital begins with discovering teams that know present traders. Given its measurement as a public firm, Ribar mentioned its traders are notably keen on rising the enterprise’s profile.
“We get references on a regular basis for people that need to study extra about our enterprise,” he mentioned. “We now have virtually day by day new investor discussions with those who need to find out about our story.”
That story includes educating potential traders about senior residing as an entire and Sonida’s particular owner-operator mannequin in comparison with the extra widespread actual property funding belief mannequin. The operator additionally sends representatives to banking conferences usually, assembly a mean of 15 to twenty new funding teams within the trade.
What tends to work the most effective for Sonida is a mixture of phrase of mouth and “pounding the pavement.”
New curiosity rising
Capital supplier curiosity in senior residing has risen over the previous six months, in keeping with Jerath. Return profiles on different asset varieties that after have been profitable are at the moment “not trying as thrilling as they’ve up to now.”
Funding teams which have extra historically sought workplace buildings or malls are increase their company infrastructure to tackle extra senior residing communities sooner or later, in keeping with Rick Swartz, senior managing director and co-leader of senior housing for JLL Capital Markets.
JLL’s technique for connecting operators and capital companions focuses on schooling and making connections. The newest quantity of curiosity in senior housing isn’t a brand new phenomenon, Swartz mentioned, with new relationships forming from personal house owners at all times seeking to make the most of broader sources of capital.
“It’s forming as a result of there may be attractiveness within the house,” he mentioned.
If operators wish to appeal to extra capital companions, particularly these new to the trade, being clear and concise on their focuses and values may help, in keeping with Jerath.
“A variety of occasions the message can get misplaced if you’re attempting to inform loads of issues when utilizing discernment to deal with the issues that the investor goes to care about,” she mentioned.
Wanting forward, Jerath and Swartz imagine there shall be a rise in partnerships and transaction quantity. JLL is seeing partnerships between operators and capital companions forming with the purpose to execute on offers inside the coming yr.
And in keeping with Jerath, there’s a potential for extra portfolio offers within the coming years.
“The opposite factor you would possibly see is extra portfolio offers the place, you understand, maybe an operator with a capital companion has constructed up a considerable portfolio of 10 to 30 property, and one other operator with capital coming in to purchase all the factor,” Jerath mentioned.
