Blackstone JV buys senior housing portfolio for $1.1bn

The alternative investment giant concurrently sold an interest in the 64 properties to Brookdale Senior Living.

Blackstone has made its first senior housing purchase from its latest opportunistic fund, according to a Tuesday announcement.

The New York-based alternative investment manager acquired 64 US properties with partner Columbia Pacific Advisors, a Seattle-based asset manager, for about $1.1 billion from real estate investment trust HCP. The deal is expected to close in the first quarter of 2017, according to HCP. At least six other private equity firms and REITs bid for the properties in the portfolio, which had an overall 85 percent occupancy during the third quarter, according to executives on HCP’s third-quarter earnings call on Tuesday.

The properties are currently leased to Brookdale Senior Living, a Brentwood, Tennessee-based REIT. In a separate transaction, Brookdale agreed to buy a 15 percent interest in the 64 properties for $170 million from Blackstone and Columbia Pacific Advisors, and the REIT will continue to manage the properties, according to a separate statement Tuesday.

“It maybe goes without saying, but we're delighted with the counterparty of this transaction, with Blackstone and Dan Baty at Columbia Pacific,” Michael McKee, HCP’s chief executive, said on Tuesday’s call. “These are folks that know this space very, very well and they're shrewd investors and I think it shows a confidence over time in the senior housing space that they would be stepping up to this.”

Terms of the transaction were not disclosed, and a spokeswoman for Blackstone declined to comment.

Blackstone acquired its interest in the portfolio on behalf of Blackstone Real Estate Partners (BREP) VIII, an opportunistic fund that the firm closed in October 2015 on $15.8 billion. The fund had a 20 percent net internal rate of return as of September 30, according to the firm’s third-quarter earnings. Other deals in the fund include the July purchase of a West Coast office portfolio for $1 billion and the May purchase of two San Francisco office towers for $489 million, PERE previously reported.

“I would hate to speak for Blackstone and Brookdale, but I've noted their commentary on their venture and they see assets that have performed better at an earlier stage in the cycle,” said Justin Hutchens, HCP’s chief investment officer. “It looks like they're going to put some planning in place to realize some upside, so I think they saw an underperforming portfolio that has a better future ahead.”

Blackstone and HCP have been on opposite sides of the deal table before. The REIT bought a 133-property portfolio of senior care homes for $1.7 billion in 2012 from Blackstone and Emeritus, a senior care REIT, according to a statement at the time. Emeritus, a Seattle-based REIT, was acquired by Brookdale in 2014. Meanwhile, Baty, Columbia Pacific’s founder, was the chairman of Emeritus until its sale.