The Real Deal New York

Kayne Anderson closes on $1.9B RE fund

Deal is a sign of developers targeting health care and real estate as Baby Boomers age
May 29, 2018 05:33PM

21 Clark Street (Credit: Google Maps)

Kayne Anderson Real Estate has closed on a $1.85 billion real estate fund focusing on medical offices, senior housing and student housing.

The deal from the Florida-based private equity company is a sign that health care-related real estate could be getting its moment in the sun as Baby Boomers age, according to the Wall Street Journal. This is expected to increase demand for senior housing and medical offices that should prove resistant to the normal boom-and-bust cycle, attracting commercial property investors to a submarket they generally have not been interested in.

Kayne raised funds for its latest deal from international investors such as pension funds, endowments and family offices. The company bought the former Jehovah’s Witnesses building at 21 Clark Street in Brooklyn Heights last year for $202.5 million and plans to turn it into a luxury senior living property.

Increased interest in senior properties is also increasing prices, which is making it harder for investors to get high returns. Green Street Advisors reported that the capitalization rate for medical office buildings dropped by 0.63 percent in 2017, while senior housing stock grew by 3.7 percent and is expected to grow by 4.7 percent this year.

The increased supply could effectively cancel out the increased demand or drive down rents.

However, Kayne CEO Al Rabil told the Journal he was not concerned about an oversupply of senior housing.

“We foresee no time, at least in my lifetime, that we will be in a supply-demand equilibrium from the senior-housing perspective,” he said. [WSJ] – Eddie Small