ROC Seniors makes a big SPLASH

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Company Profile
ROC Seniors
makes a big SPLASH
Private equity fund manager amasses $1.2 billion
seniors housing portfolio in just two years
By Jeff Shaw
When Bridge Investment Group
Company:
ROC Seniors Housing
Fund Manager
Partners became aware of the
Parent Company:
healthy return-on-investment
Bridge Investment
numbers generated by the
Group Partners
seniors housing industry, the
Headquarters:
company wanted in on the
Orlando, Fla.
action. In response, Bridge
Founded: 2013
joined forces with experienced
Portfolio:
seniors housing executives
42 properties,
to form ROC Seniors Housing
over 5,200 units
Fund Manager in 2013.
Total Portfolio value:
The original goal of the Salt
$1.2 billion
Lake City-based investor was
lofty: create a company to speJacaranda Trace in Venice, Fla., is a luxury seniors housing community owned
cifically manage private equity
become CEO.
by ROC Seniors Housing Fund Manager. The community includes two
seniors housing funds, targeting independent living towers — Barclay Manor with 201 units and Whittier
“Bridge had all the
Manor with 188 units — as well as 20 units of assisted living, 55 villas and a
an initial capital raise of $400
infrastructure on the
36-unit memory care facility.
million.
capital markets side and a
The first ROC Seniors-managed fund
skilled nursing facilities. That’s because
great track record of raising institutional
launched in 2014. By the time it closed
ROC specializes in private pay seniors
private equity for their other funds,” says
in June 2015, the fund had raised a total
housing rather than properties depenChapin. “Bridge determined that seniors
of $740 million after it became clear that
dent on government reimbursement.
housing had a lot of legs. That’s a sector
there were far more opportunities for
High-net-worth individuals, pension
that it wanted to focus on and commit
ROC Seniors’ value-add strategy than
funds and endowments are among the
to.”
previously known.
investors in ROC Seniors’ fund. InterTo help fill out the C-suite, Chapin
In less than a year’s time, the $740
national investors, some from as far
called on an old friend to become chief
million raised has made ROC Seniors
away as Taiwan and Australia, account
investment officer — Phil Anderson,
the largest seniors housing-exclusive
for 15 percent of the equity raised. ROC
who Chapin had recruited when CNL
private equity investor in the country,
Seniors also has skin in the game by coRetirement Properties, another seniors
according to the company.
investing alongside its partners.
housing investment company, was
The capital is currently invested in 42
The closed-end funds have a 10-year
created.
properties across 19 states totaling over
life.
Upon CNL Retirement Properties’
5,200 units. The portfolio is valued at
acquisition by HCP in 2006, the two
approximately $1.2 billion. ROC Seniors
Building the team
went in different directions professionexecutives hope to grow the portfolio to
Founded in 2009, Bridge had already
ally, but stayed
60 or more properties with a total value
managed several successful funds
close personally. The friendship is so old
of $2 billion by the end of this year.
by the time it decided to launch a
that Anderson’s now-wife once asked
The senior living communities range
healthcare real estate platform.
Chapin’s opinion before their first date.
in size from 60 to 450 units and include
Bridge needed an expert in seniors
“It was an easy endorsement,” jokes
independent living, assisted living and
housing to successfully deploy those
Chapin.
memory care. The company invests in
funds, which is
Chapin and Rick Steinberger, a longsome continuing care retirement comwhy it called on veteran investor Robb
time business partner and ROC Seniors’
munities as well, but not standalone
Chapin to help build ROC Seniors and
chief operating officer, met with AnderFebruary-March 2016
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Seniors Housing Business
www.seniorshousingbusiness.com
ROC Seniors purchased Thunderbird, a 345-unit luxury independent and
assisted living community near Phoenix, and implemented a $7 million
renovation project. The library is pictured at left before the renovations,
and at right afterward. Changes included opening up, improving and
modernizing the space. Common area renovations are complete, and the
conversion of 72 independent living units to assisted living and memory
care is slated for completion in third-quarter 2016.
son to discuss the formation
of ROC Seniors and decided
a second professional partnership was in order.
“We had coffee and said,
‘It worked
out pretty well the first time
at CNL. We have enough gas
in the tank to give it another
good run. We’ll try it again,’”
says Anderson.
The company established
its headquarters in Orlando,
Fla. — overlooking two lakes
full of skiers and wakeboarders — where its 26 employees are now based.
demand, as well as the specific developer and operator
of the property.
“We go into every market
with our eyes wide open,”
says Anderson. “We’re pretty
picky about understanding
the micromarkets and what
we’re buying. We want to
make sure we’re entering a
market we believe will fill.”
A buy-and-improve
approach
Although the company
does invest
in some new construction,
more than
80 percent of its investments
go toward acquisitions. The
company actively seeks out
value-add opportunities.
“Our strategy centers
around acquisitions where
we see upside that others
don’t see,” says Anderson.
“There needs to be an
opportunity to move the NOI
(net operating income) from
wherever it is today, increasing it anywhere from 10 to 80
percent.”
ROC Seniors improves
NOI in a variety of ways:
renovating the property,
“right-sizing” rents, changing marketing strategies,
reducing expenses, generally
improving operations, or
even changing use (such as
adding memory care units).
There is no shortage of
opportunities for the buyand-improve strategy.
“If you look across the
inventory of seniors housing
today in the U.S., much of
it is well over 20 years old,”
says Chapin. “This presents
a lot of obsolescence, both
operationally and functionally, despite a lot of great real
estate in great locations.”
There are many communities looking for a value-add
owner, says Chapin. This is
why the company decided
— and was able — to nearly
double its initial planned
capital raise.
To date, ROC Seniors
principals have invested
in seniors housing properties across 38 states. Before
making an acquisition, the
team dives deeply into the
regional market data and the
“micromarket” in which the
property operates.
When determining
whether a micromarket is
worth entering, ROC Seniors
considers market rates, current inventory and qualified
www.seniorshousingbusiness.com
Being a good partner
Since ROC Seniors
acquires but doesn’t operate
its communities, working
with quality operators is
crucial to its success.
The company works with
10 to 15 different operators,
preferring to do repeat business with an existing partner.
ROC Seniors’ typical investment structures are similar
to a RIDEA (REIT Investment
Diversification and Empowerment Act) structure.
“Our asset management
people come to understand
how a particular manager
likes to run a property —
how they hire people, how
they motivate them, how
they train them,” says Anderson. “If we do a transaction
with a manager, chances
are we’re going to do many
more with that same manager. You end up really getting to know each other.”
The partnerships bring
economies of scale to each
transaction, reducing negotiation times as the companies
already know each other well
and understand each other.
In some cases, ROC Seniors
even reuses paperwork from
previous transactions with
an operator to help simplify
or expedite matters.
Knowing its partners
so well also enables ROC
Seniors to determine the
operator most likely to
achieve success at a particular property.
“An operator that’s really
good on a 280-unit community might not be as good on
a 60-unit community,” says
Chapin. “Every operator has
its own secret sauce.”
The strong partnerships
have paid off in another way,
too. More than half of ROC
Seniors’ acquisition opportunities come through direct
referrals due to existing
operator relationships.
An operator that either
owns or operates a property
knows that ROC Seniors is
strategically aligned. When
it comes time to find a new
investor or sell the property,
the first call is obvious.
“We’ve never subjected
ourselves to the general
cattle calls, where a broker-
Seniors Housing Business
n
February-March 2016
age goes out to the masses
and the property goes to
the highest bidder,” says
Chapin. “The success of what
we’ve done is in building our
investments through longterm relationships.”
ROC Seniors’ biggest
acquisition of the year was
achieved through this type
of partnership.
Meridian Senior Living,
which partnered with ROC
Seniors on previous deals,
was brought on as the operator of a six-property, 596unit portfolio in California,
Michigan, Pennsylvania and
“There needs to
be an opportunity
to move the NOI
from wherever
it is today,
increasing it
anywhere from
10 to 80 percent,”
says Phil Anderson,
chief investment
officer, ROC
Seniors Housing
Fund Manager.
“We’ve never
subjected
ourselves to the
general cattle
calls, where a
brokerage goes
out to the masses
and the property
goes to the
highest bidder,”
says Robb Chapin,
CEO, ROC Seniors
Housing Fund
Manager.
Washington, D.C. Meridian
was contracted to buy the
portfolio and was looking for
a buyer or capital partner.
Because of prior deals, it was
easy for Meridian to bring
ROC Seniors to the table.
ROC Seniors ended up
purchasing the portfolio in
December with Meridian
as manager. ROC Seniors
wouldn’t disclose the purchase price, but confirmed
that the transaction was its
largest capital deployment
of the year.
“That’s the classic example of an off-market deal for
us,” says Anderson. “It sounds
so simple, but you really
have to like the people you
work with. It makes things
a lot easier. Particularly
when things don’t go quite
the way you expect, you’d
better
like the guy on the other
side of the table.”
New investors bring
good and bad
Although ROC Seniors
has managed to find plenty
of attractive opportunities to deploy its capital,
Anderson and Chapin both
see signs of many inexperienced investors flooding
the seniors housing sector.
Seniors housing’s strong
performance during the
Great Recession was a blessing and a curse. The industry’s resilience was good
for existing players in the
industry, but it also gained
the attention of many who
don’t have the knowledge to
succeed in the sector.
“What’s frustrating from
our perspective is that we
see a lot of inexperienced
capital coming into the
market,” says Chapin, referring to aggressively underwritten acquisitions and
developments.
Seniors housing is within
a decade of being considered a core asset class in
commercial real estate rather
than simply a niche sector,
adds Chapin.
The only reason it isn’t
core class already is size, says
Anderson. That will change
naturally as the demand for
seniors housing grows. It will
never be as large as multifamily, but will get closer
over time.
“Within 15 years, this
industry is going to double,
maybe triple, in size. The
demographics alone will
make it double,” says Anderson. “Demographics aren’t
going to make multifamily
double. The gap between
the size of those two industries is going to narrow.”
The silver lining is that
experts from all corners of
the sector will be in greater
demand as new investors
enter seniors housing, notes
Anderson.
“The good news for the
industry is that there’s so
much operational specialization, investors are going to
need people that have that
specialized knowledge.” n
This article originally appeared in Seniors Housing Business, February/March 2016.
©2016 France Media, Inc.
www.seniorshousingbusiness.com
February-March 2016
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Seniors Housing Business
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