A California health care real estate investment trust snagged a suburban Chicago senior living facility from Blackstone for a steep discount, public records show.
New York-based mega investor Blackstone sold the Lake Barrington Woods senior living community for about $50 million to Tustin, California-based Sabra Health Care REIT in a deal that closed Feb. 23, records show.
Blackstone bought the 192-unit Lake Barrington complex in 2017 for $73 million with a $57 million loan from lender Holliday Fenoglio Fowler, which was acquired by JLL in 2019, according to public records.
In 2019, the investment giant completed a multimillion-dollar renovation of the property and received approval from the Village of Lake Barrington to increase the number of assisted living units onsite, the Chicago Tribune reported at the time.
When the pandemic hit in 2020, however, the senior living facility lost occupancy and was unable to secure new tenants for some time, commentary from CMBS loan tracking service MorningStar shows.
As recently as October, the facility was 80 percent occupied and had a debt service coverage ratio of 0.79, which means that operating expenses were outpacing revenue.
Morningstar wrote that Blackstone was discounting small one-bedroom units and studios due to lower demand for such floor plans, in an effort to drive up occupancy. It was also running short-term concession packages to attract couples.
Before completing the sale, Blackstone’s $57 million loan carried a $55 million balance and was set to mature in April 2027, according to MorningStar.
Further details of the nearly $50 million sale to Sabra are unclear, but it is likely that Blackstone had to chip in some cash to pay off the debt. Representatives for Blackstone and Sabra Health Care REIT did not respond to requests for comment.
The sale price represents the second markdown for the facility, which was built in 2000.
Ohio-based Health Care REIT bought the Lake Barrington Woods senior living facility for $82 million in 2012, before selling it to Blackstone for $73 million in 2017. The deal was part of a $459 million sale/leaseback deal involving 19 properties operated by Chicago-based Senior Lifestyle, Crain’s reported at the time.
Still demand in the sector is expected to grow as the baby boomer generation ages. The population of Americans over age 75 is expected to rise by more than 4 million people by 2030, according to U.S. Census Bureau data compiled in a report from PWC.
The National Investment Center for Seniors Housing & Care expects that limited new supply and steady growth in demand will drive the average senior housing occupancy rate above 90 percent this year, potentially reaching the highest occupancy rate reported in the 20 years that the NIC has tracked this data, PwC noted.
Blackstone has been on a selling spree in the Chicago suburbs across asset classes.
Last month, Los Angeles-based Ares Management bought a Joliet distribution center, which is leased by tech giant Amazon, from Blackstone for $49 million. The distribution center, at 401 East Laraway Road, is likely worth more than the price that it traded for, however, because Ares already had a limited interest in the property.
And in January, Blackstone’s retail affiliate, Perform Properties, sold the suburban Streets at Woodfield shopping center for $69 million to Hartford, Connecticut-based Hutensky Capital Partners, after buying it for $168.5 million in early 2015. The sale price came out to a 59 percent discount.