Blackstone Retreating from $1.8B Senior Housing Bet

The senior housing sector is well-regarded for its fundamentals, but one of the biggest investors in the world couldn’t crack the code and is retreating from the asset.

Blackstone is liquidating a $1.8 billion investment in the senior housing sector, the Wall Street Journal reported, made across two significant portfolio acquisitions. The quiet selloff has already cost the investment giant more than $600 million and is not yet through.

The portfolio, comprising roughly 9,000 units across the country, is unfolding piece by piece. Blackstone is incurring losses of up to 70 percent compared to the purchase price.

It acquired the portfolios in 2017 from HCP and Welltower for $1 billion and $747 million, respectively. Blackstone financed those deals with $1.2 billion in debt; loans for about two dozen of the properties entered special servicing in February, indicating growing distress.

The liquidation started unfolding behind the scenes three years ago. Since then, Blackstone has sold 70 of its 90 properties in the portfolio and is in talks to sell the rest. More than a dozen of its properties faced regulator scrutiny over resident care concerns.

A spokesperson for Blackstone referred to the struggles of the wider sector since the onset of the pandemic, while also noting that the fund that contained the senior housing losses remained a strong performer despite that obstacle.

While senior housing sees strong demand from an aging population, investments aren’t as simple as a more traditional multifamily asset. Senior housing facilities often have health services, food services and large staffs, making them more operationally intensive to run. Additionally, costs have increased in recent years and the pandemic brought a temporary demand dip.

Even though Blackstone is pumping the brakes on its senior housing efforts, other firms remain full-steam ahead.

Welltower is in the midst of a $6 billion sale of 18 million square feet of outpatient medical space, which comes after the Toledo-based real estate investment trust made $14 billion in acquisitions across more than 700 senior communities in the U.S., U.K. and Canada.

Additionally, Sonida Senior Living recently agreed to acquire CNL Healthcare Properties in a $1.8 billion stock-and-cash deal.

— Holden Walter-Warner