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PHILADELPHIA-Acting on behalf of its client, the Kuwait Finance House, locally based Grosvenor Investment Management US Inc. has sold a 15-proprety portfolio to a joint venture between Australia's GPT Group and Benchmark Assisted Living LLC. The price tag is $268 million, which translates to just north of $228,279 a unit.
Benchmark will continue to operate and manage the facilities. "GPT has the majority interest," Dick Layman, GIM's senior managing director, tells GlobeSt.com, without disclosing the proportions of the JV. The facilities encompass independent, assisted and Alzheimer assisted housing and have an aggregate of 1,174 units located in the six New England states of Connecticut, Rhode Island, Massachusetts, Vermont, Maine and New Hampshire.
Legg Mason Real Estate Services, which was acquired by GIM's London-based parent in 2006 and resulted in the formation of GIM here, purchased a 90% interest in 11 of the properties on the Kuwaiti investor's behalf in 2004. "The Kuwait contract transferred to us," Layman explains. GIM acquired the additional four properties on behalf of its client later in 2006. Both acquisitions were part of recapitalizations of existing JVs between Benchmark and Boston-based AEW Capital Management LP, "and we replaced AEW," Layman says.
The portfolio is currently 94% occupied, and Layman says the properties are between five and 15 years old. "The older facilities have been rehabbed. This portfolio showed a remarkable cash flow and appreciation over a 24-month period, providing a strong internal rate of return and multiple of invested capital," he says. Layman credits the sales transaction to the quality of the portfolio and Benchmark's management team along with the strength of the senior housing market and offshore investors' continuing interest in stable US assets.
He described the portfolio as a "high quality, high cash-flow, Shari'ah-compliant investment opportunity" for GIM's Middle Eastern client, and says, "we plan to go forward with Kuwait Finance House on other senior housing properties." Referring to Shari'ah-compliance, he explains, "because [Kuwait Finance House] is an Islamic bank, it is comfortable with healthcare properties. Retail and restaurant facilities are often not appropriate, because they can involve the sale of alcohol." GIM will advise the client on future acquisitions and potential developments.
Australians have recently eclipsed Middle Easterners and Europeans as the biggest foreign investors in US real estate, according to GIM. In 2002, the Australian government required employers to put 9% of workers' salaries in retirement accounts, which filled pension fund coffers and led to increased US investment by those funds and other Australian investors.
Sydney-based GPT is among the largest diversified property groups listed on the Australian Stock Exchange. Wellesley, MA-based Benchmark currently owns and operates 43 senior living communities.
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