Kayne Anderson breaks into senior housing with $413m deal

In its first move into the senior housing market, Kayne Anderson Real Estate Advisors (KAREA), the real estate investment arm of Kayne Anderson Capital Partners, has acquired the Aston Gardens senior housing portfolio with operator and developer Discovery Management Group. Together, KAREA and Discovery bought out Discovery’s existing partner in the portfolio, an affiliate of GE Partners. KAREA, which now holds a majority stake in the properties, did not disclose the financial terms of the transaction, but market sources revealed the purchase price to be approximately $413 million. 

The acquisition represents the Boca Raton, Florida-based firm’s first investment targeting the senior housing sector. KAREA has made its name as a student housing specialist, currently managing 18,500 beds. However, the firm’s interest in other niche real estate markets has led KAREA to devote a limited portion of the capital raised by its latest opportunistic fund, Kayne Anderson Real Estate Partners (KAREP) III, to investments outside of the student housing sector, like the Aston Gardens portfolio. KAREA closed the oversubscribed KAREP III on $750 million in May.

KAREA cited longer life expectancies and an increased need for post-retirement opportunities as reasons for breaking into the senior living market. Al Rabil, KAREA managing partner and chief executive officer, told PERE that the firm funded the acquisition using a significant investment from KAREP III. A sidecar vehicle comprised of equity from select limited partners provided the remaining capital.

“We’re excited not only because it’s a strong first investment but also because there’s opportunity to scale up with additional acquisitions and developments and to gain a significant relationship with Discovery,” said Rabil. 

The Aston Gardens portfolio consists of six Class A properties totaling 1,930 units positioned throughout Florida. The assets, located in Naples, Parkland, Sun City, Tampa and Venice, offer a unit breakdown of 82 percent independent living and 18 percent assisted living options, with a total portfolio occupancy rate of 97 percent. Rabil told PERE that KAREA was interested in investing in Florida in particular as the demographic trends have created a strong supply and demand imbalance in the senior housing sector.

Bonita Springs, Florida-based Discovery Senior Living includes the Discovery Management Group, Aston Gardens communities, Discovery Village communities, Discovery Realty Group and Discovery at Home, a Medicare-certified home healthcare company. “We are delighted that we were able to partner with KAREA in order to negotiate a buyout and keep the Aston Gardens assets in our portfolio,” said Discovery chief executive Thomas Harrison in a statement.

Although this marks KAREA’s first investment in the sector, Rabil indicated that the firm currently is in the process of sourcing future investments in the senior housing market. Recently, KAREA made headlines with its quick fundraising for KAREP III, exceeding the fund’s target on a final close just five months after its launch.