Bridge Investment Group advanced its retreat from Chicagoland, exiting a suburban senior living deal after encountering financial distress in the region’s office market.
The publicly traded Salt Lake City-based real estate firm sold two Wheaton senior living properties for a combined $78.6 million at a time when capitalization rates on investments in the sector are starting to decline, according to public records and brokerage data.
Bridge Investment Group sold the Wyndemere, a senior living and retirement community off of Manchester Road in the western suburb of Wheaton, for just over $70 million in a deal struck earlier this month, according to DuPage County documents. The Wynscape Health & Rehab, a neighboring facility under the same ownership, sold for just less than $8.6 million along with the Wyndemere.
The Wyndemere campus offers housing for seniors of varying needs with over 200 units of independent living, more than 50 units of assisted living, over 100 skilled nursing units, and memory care services.
The buyer purchased the facilities through an LLC linked to a Massachusetts-based nonprofit called New England Life Plan Communities, also known as JustLiving Communities. JustLiving contracts with Life Care Services to manage the day-to-day operations at the Wyndemere, according to the companies’ websites. Life Care Services has headed the property’s operations since 2010, when it teamed up with Lake Forest-based real estate investment firm Westminster Capital to buy the asset from Central DuPage Hospital. Bridge became the property’s landlord in 2015.
The seller, Bridge, had invested in the facilities through its Florida-based senior housing arm, Bridge Senior Living, which runs independent living, assisted living and memory care facilities “across the Midwest, New England, the Southeast, and the Gulf States,” according to the company’s website.
Bridge’s sale in Wheaton follows several high-profile blows it took in the Chicago-area office market. At One North LaSalle Street in the Loop, New York-based discount hunter Namdar Realty Group this year bought the 47-story property’s loan note at a 73 percent discount from its face value of $74 million, putting it in position to seize the property from Bridge, which took out the debt before struggling to make the property financially viable in the wake of the pandemic.
Bridge also took a loss of about $54 million when it sold a suburban Chicago office complex last year to the firm IndusPAD for $20 million, down from the property’s previous value of $74 million.
Wyndemere and Bridge Senior Living did not respond to requests for comment made by phone and email Friday. New Plan Communities couldn’t be reached for comment.
Bridge looks to have driven an increase in the senior living properties’ value during its ownership tenure: it purchased the Wheaton assets through an LLC back in 2015 for $66.8 million, and took out a mortgage with Bank of America. It built a new 33-unit independent living building on the campus in 2020 with the help of RDG Planning & Design.
Nearly a decade later, Bridge sold off the properties at a time when senior housing capitalization rates — a measure of the rate of return on an investment — are starting to decline, according to a November CBRE report. While lower cap rates imply smaller profit margins, they also tend to shrink as a property’s value increases and appears less risky to market players.
The CBRE report, which analyzed survey responses from 100 senior real estate professionals and investors in the sector, found that the average senior housing capitalization rate had decreased by 8 basis points over the preceding six months.
“A clear majority of respondents reported either no change or a decrease in capitalization rates from the prior survey and more respondents predicted flat rent growth in the year ahead,” the report said.
The decline in the rate of return within the sector was highest (10 basis points) for independent living and assisted living facilities — the bulk of Wyndemere’s offerings. The survey’s respondents reported no change for memory care facilities, according to the report.
This is a break from last year when the rate of return on investment in senior housing soared in the first half of the year, increasing by at least one whole percentage point across all subsectors of the market: independent living, assisted living and memory care.
This year, rates flatlined and began to fall, though free-standing memory care facilities reported an increase in rate of return, up one to two basis points to 9.5 percent on average.