Although not necessarily well-known in private equity real estate circles, Dan Baty’s name is eminent in the senior living scene. As the head of such prominent firms as nursing home operator Hillhaven, leading retirement community servicer, Holiday Retirement, and assisted living powerhouse, Emeritus, Baty has been in the business for the past 40 years.
In 2006, he launched Seattle-based Columbia Pacific Advisors as an alternatives investment platform for his family and a limited number of outside investors. Now, the firm is inviting other investors into the mix.
Enter Joe Kelly, former US head of alternatives at Russell Investments’ Americas institutional business. Kelly joined Columbia Pacific in June as managing director of business development. Although he works across all the firm’s platforms -including real estate debt and equity, hedge funds, growth capital and private equity – he is currently focusing on bringing in more institutional clientele for the firm’s upcoming sophomore real estate fund.
Columbia Pacific’s current investor relationships include high net worth individuals, family offices and small institutions. Kelly is leveraging his 20 years of navigating the investor community to bring the firm more institutional capital from pensions, endowments and foundations as well as bigger family offices.
Columbia Pacific Real Estate Fund II will follow the same strategy as the firm’s debut vehicle, investing in value added acquisitions and opportunistic development in a diversified US-focused fund, with a portion of the capital going to senior living and healthcare assets. Although the firm is technically an emerging manager, it says it has comparable contacts and resources to that of a larger firm, which Kelly sees as a major advantage.
For example, Baty’s history in the sector gives Columbia Pacific access to operator relationships that are 20 to 25 years old. “If you’re developing or repositioning healthcare properties, you have to have great operator relationships in order to capitalize on your investment,” said Kelly. “Baty’s kind of the gold standard in the business.”
Its premiere value-added real estate vehicle, Columbia Pacific Real Estate Fund I, closed on $130 million in February 2013.
“It was not a huge fund, and that was intentional,” Kelly noted. “We don’t like to sit on capital, so we’d rather have a smaller fund. The team was sensitive to raising the amount needed to capitalize on opportunities they saw in the market.”
Thus far, those efforts have paid off for both Columbia Pacific and its investors. Fund I invested in 18 properties and returned a 24 percent net IRR. This time around, however, Columbia Pacific is targeting $300 million for the fund, due to its robust pipeline of potential deals.
Columbia Pacific has timed its debut wisely, entering the institutional market in a moment when niche asset classes like senior living and healthcare are blossoming. Just last month, the strength of those sectors was proven when Harrison Street Real Estate Capital made its largest healthcare exit to date and AEW Capital closed its second senior housing fund above target. What sets Columbia Pacific apart, Kelly says, is its focus on building high quality product.
“We’re looking very closely at demographics and population growth and going wherever we see the most opportunity,” Kelly added. “We’re looking to service that demand of the aging population because there are not enough state-of-the-art facilities out there.