Private equity’s growing presence in senior living
December 1, 2023
In the last decade, private equity firms have increasingly invested in assisted living providers and senior communities. This has been done primarily through private equity funds focused on real estate acquisition, including funds managed by firms KKR, Bain Capital, Harrison Street, and others.
However, the assisted living sector is under-regulated, making it hard to identify and prevent harms to assisted living residents and communities. As older adults continue to seek alternatives to institutional care, it is increasingly important to understand and respond to problems in assisted living.
The need for assisted living oversight is underscored by private equity’s growing presence in the industry. Policymakers and regulators must put more attention on assisted living communities and ensure that older adults are not harmed by private equity’s drive for large short-term profits.
Assisted living is underregulated
Assisted living is for older adults who need daily care, but do not need as much care as provided in a nursing home. There are more than 30,000 assisted living communities with more than 1 million beds in the U.S. as of 2023. More than half of assisted living communities are affiliated with companies that own multiple communities.[1]
The senior living industry has seen increased investment in recent years particularly due to demographic trends as U.S. residents live longer and use more healthcare.[2] According to Axios, senior care “makes for a gold rush that can’t be matched elsewhere.”[3]
Assisted living and nursing homes are distinct industries with different market conditions and regulatory terrains. Nursing homes are state- and federal-funded, and states generally provide a nursing home beds to those who meet Medicaid requirements.[4]
On the other hand, the overwhelming majority of assisted living residents pay privately; and assisted living communities can fly under the regulatory radar. The U.S. government doesn’t oversee assisted living facilities.[5] State-level regulation of assisted living providers is patchwork and uneven across states.[6]
The lack of regulation makes it difficult to identify systemic issues in assisted living communities. For example, federal records are unable to identify the number of deaths in assisted living communities during the pandemic.[7]
The federal government also does not have data available on frequency of evictions at assisted living communities. But because these evictions have become so frequent, some states have implemented policies to curb them, according to the Washington Post.[8]
This lack of oversight and related data may create an attractive context for private equity investors seeking quick profits. Regulators and policymakers should pay attention to communities acquired by these firms to ensure that residents are not exploited for short-term profits.
Private equity firms and assisted living in the last decade
Private equity firms have been increasingly drawn to assisted living facilities in the last decade. This has been especially true since 2015, when private equity firms began acquiring senior housing from real estate investment trusts (REITs) seeking to sell off properties.[9] Private buyers, including private equity, averaged $1.5 billion in transactions quarterly from 2016 to 2020.[10]
Private equity firms can form their own REITs to acquire senior living communities. In 2016, Blackstone’s created a $5 billion non-traded REIT to invest in real estate, potentially including senior living. Blackstone declined to comment about the potential extent of the REITs senior living investments.[11] As of October 2023, Blackstone Real Estate Income Trust was worth approximately $67 billion.[12]
More common than PE-firm REITs, are private equity investment funds dedicated to real estate. For example, affiliates with Blackstone fund Real Estate Partners VIII purchased an ownership stake in a 64-community senior living portfolio in 2017.[13]
KKR
Private equity firm KKR has closed two funds targeting real estate, including senior housing, since 2018. In early 2018, it closed a $2 billion real estate fund to purchase properties including senior housing. The fund had already spent or committed $250 million near the time of the announcement.[14] In October 2021, KKR closed another $4.3 billion real estate fund; before the announcement, the fund had already committed more than $1 billion.[15]
KKR made a major acquisition in 2019 when it acquired senior living provider Benchmark. The firm bought Benchmark’s 48-property portfolio from real estate investment trust Welltower for $1.8 billion.[16]
Bain Capital
Private equity firm Bain Capital is notable for its real estate funds’ institutional backing. In 2019, the firm raised $1.5 billion for a Harvard-backed real estate fund. Harvard and Bain had an aligned interest in senior housing investments, according to Senior Housing News. Bain’s real estate fund also received major backing from the Los Angeles County Employees Retirement Association.[17]
In 2021, Bain Capital closed on another real estate fund with senior housing as a target. The $3 billion Bain Capital Real Estate Fund II, included among its targets senior housing and assisted living properties.[18] As of July 2023, Bain was aiming to raise $3.75 billion for a third real estate fund that would include senior housing among its investment targets.[19]
Bain also has also taken an ownership stake in a large senior housing developer and investor Capitol Senior Housing, which, since its founding in 2003, has invested in more than 120 senior communities.[20] Its growth has been backed with funding from private equity firms Carlyle Group and Bain Capital.[21]
Harrison Street
Harrison Street also has a large private equity portfolio in assisted living and senior housing. In the first fifteen years since its founding in 2005, Harrison Street invested more than $7 billion in senior housing.[22]
Through 2019, Harrison Street’s investments included more than 26,000 senior housing units. In August 2019, Harrison Street announced it had raised $1.6 billion for a fund that would put an estimated 30% to 40% toward senior housing. In August 2019 the fund had already committed more than a quarter of its capital.[23]
In October 2021, Harrison Street closed a fund totaling $2 billion, intending to put about half into senior housing and other healthcare assets. At the closing’s announcement, Harrison Street had already committed more than half the fund to 76 properties.[24]
The firm has also made large senior living acquisitions in recent years. In late 2019, Harrison Street acquired 1,322 units across 11 communities in three states for an undisclosed price.[25] In February 2021, Harrison Street bought 12 senior rental communities from REIT Healthpeak.[26] A few months later the firm bought 24 senior housing communities for $1.2 billion.[27]
Kayne Anderson
Private equity firm Kayne Anderson Capital Advisors primarily invests in assisted and independent living communities. In 2018, it exceeded a $1.2 billion fundraising target for a real estate fund focused on senior housing and medical office buildings.[28] In August 2020 the firm paid about $1 billion to acquire 27 medical office buildings and seven senior housing properties.[29]
The following year, the firm closed the largest fund in its history at $2.75 billion, with plans to target senior housing and other real estate. At the time, Kayne Anderson’s investment into senior housing included more than 17,000 units.[30]
PE’s short-term model doesn’t fit long-term care
Private equity’s growing presence in senior living during recent years should be cause for concern. Private equity firms generally make investments expecting to gain large financial returns in three to four years, sometimes at the expense of stakeholders like residents and workers.
As private equity continues to invest in senior living, policymakers and regulators must act to address any potential harms these firms create.
For assisted living residents, private equity investment might mean increased rents for residents, reduced care staffing, and lack of necessary facility improvements.[31] These measures are incompatible with a senior living model that prioritizes care and support for older adults.
People who live in assisted living communities—and all people—should not be subjected to increased costs and worsened living conditions for the sake of private equity’s profits. Policymakers and regulators should place increased attention on assisted living and senior communities and ensure that private equity does not create long-term care problems for short-term gain.
[1] National Center for Assisted Living. “Facts & Figures.” Accessed October 12, 2023. https://www.ahcancal.org/Assisted-Living/Facts-and-Figures/Pages/default.aspx.
[2] Austin Montgomery. “Venture Capital, Private Equity Continues to Pour Into Senior Care.” Senior Housing News, November 21, 2022. https://seniorhousingnews.com/2022/11/21/venture-capital-private-equity-continues-to-pour-into-senior-care/.
[3] Sarah Pringle. “Private Equity’s Elder Care Race.” Axios, November 19, 2022. https://www.axios.com/2022/11/19/private-equity-elder-care.
[4] Lita Epstein. “Medicaid and Nursing Homes: A Quick Guide to the Rules.” Investopedia, May 19, 2023. https://www.investopedia.com/articles/personal-finance/072215/quick-guide-medicaid-and-nursing-home-rules.asp.
[5] Christopher Rowland. “Assisted-Living Homes Are Rejecting Medicaid and Evicting Seniors.” Washington Post, April 6, 2023. https://www.washingtonpost.com/business/2023/04/06/seniors-assisted-living-medicaid-eviction/.
[6] U. S. Government Accountability Office. “Medicaid Assisted Living Services: Improved Federal Oversight of Beneficiary Health and Welfare Is Needed,” February 5, 2018. https://www.gao.gov/products/gao-18-179.
[7] Allison Pecorin. “7,000 Killed in Assisted Living Due to COVID-19, Report Finds.” ABC News, July 2, 2020. https://abcnews.go.com/Politics/7000-killed-assisted-living-due-covid-19-report/story?id=71560689.
[8] Lita Epstein. “Medicaid and Nursing Homes: A Quick Guide to the Rules.” Investopedia, May 19, 2023. https://www.investopedia.com/articles/personal-finance/072215/quick-guide-medicaid-and-nursing-home-rules.asp.
[9] Amy Baxter. “Foreign Investors, Private Equity Snapping Up Senior Housing Real Estate.” Senior Housing News, November 17, 2016. https://seniorhousingnews.com/2016/11/17/foreign-investors-private-equity-snapping-up-senior-housing-real-estate/.
[10] Tim Mullaney. “Private Equity Surge Raises Apprehensions in Senior Housing Industry.” Senior Housing News, February 11, 2020. https://seniorhousingnews.com/2020/02/11/private-equity-surge-raises-apprehensions-in-senior-housing-industry/.
[11] Amy Baxter. “Blackstone Creates $5 Billion REIT with Senior Housing Prospects.” Senior Housing News, August 10, 2016. https://seniorhousingnews.com/2016/08/10/blackstone-creates-5-billion-reit-senior-housing-prospects/.
[12] Alicia Clanton. “Blackstone’s $67 Billion Real Estate Fund Sees Withdrawal Requests Decline.” Bloomberg, October 2, 2023. https://www.bloomberg.com/news/articles/2023-10-02/blackstone-s-67-billion-reit-sees-withdrawal-requests-decline.
[13] Brookdale Senior Living Inc. “Brookdale Completes Transaction With Blackstone.” Cision PR Newswire, March 30, 2017. https://www.prnewswire.com/news-releases/brookdale-completes-transaction-with-blackstone-300431674.html.
[14] Mary Kate Nelson. “New $2 Billion KKR Fund to Invest in Senior Housing.” Senior Housing News, January 10, 2018. https://seniorhousingnews.com/2018/01/10/new-2-billion-kkr-fund-invest-senior-housing/.
[15] Business Wire. “KKR Closes $4.3 Billion Americas Opportunistic Real Estate Fund,” October 4, 2021. https://www.businesswire.com/news/home/20211004005318/en/KKR-Closes-4.3-Billion-Americas-Opportunistic-Real-Estate-Fund.
[16] Tim Mullaney. “Private Equity Giant KKR Is Benchmark’s New Capital Partner.” Senior Housing News, August 13, 2019. https://seniorhousingnews.com/2019/08/13/private-equity-giant-kkr-is-benchmarks-new-capital-partner/.
[17] Tim Regan. “Bain Capital’s New $1.5B Real Estate Fund May Target Senior Housing.” Senior Housing News, July 2, 2019. https://seniorhousingnews.com/2019/07/02/bain-capitals-new-1-5b-real-estate-fund-may-target-senior-housing/.
[18] Tim Regan. “Bain Capital Closes $3B Fund With Senior Housing a Target.” Senior Housing News, December 9, 2021. https://seniorhousingnews.com/2021/12/09/bain-capital-closes-3b-fund-with-senior-housing-a-target/.
[19] Tim Regan. “Senior Housing a Target in New Bain Capital Fund Raising Almost $4B.” Senior Housing News, July 7, 2023. https://seniorhousingnews.com/2023/07/07/senior-housing-a-target-in-new-bain-capital-fund-raising-almost-4b/.
[20] Capitol Seniors Housing. “About Capitol Seniors Housing.” Accessed October 31, 2023. https://capitolseniorshousing.com/about-us/.
[21] Sarah Browning. “Capitol Seniors Housing Opens Arbor Terrace Mountainside in New Jersey.” Capitol Seniors Housing, August 22, 2018. https://capitolseniorshousing.com/capitol-seniors-housing-opens-arbor-terrace-mountainside-in-new-jersey/.
[22] Tim Regan. “Harrison Street Acquires Portfolio of 11 Brightview Communities.” Senior Housing News, December 11, 2019. https://seniorhousingnews.com/2019/12/11/harrison-street-acquires-portfolio-of-11-brightview-communities/.
[23] Tim Mullaney. “Harrison Street Raises $1.6 Billion Fund, Targets Senior Housing.” Senior Housing News, August 20, 2019. https://seniorhousingnews.com/2019/08/20/harrison-street-raises-1-6-billion-fund-targets-senior-housing/.
[24] Tim Mullaney. “Harrison Street Closes $2 Billion Fund, Senior Housing Among Investment Targets.” Senior Housing News, October 4, 2021. https://seniorhousingnews.com/2021/10/04/harrison-street-closes-2-billion-fund-senior-housing-among-investment-targets/.
[25] Tim Regan. “Harrison Street Acquires Portfolio of 11 Brightview Communities.” Senior Housing News, December 11, 2019. https://seniorhousingnews.com/2019/12/11/harrison-street-acquires-portfolio-of-11-brightview-communities/.
[26] Tim Mullaney. “Harrison Street ‘Handpicked’ 12 Former Atria Communities to Acquire from Healthpeak.” Senior Housing News, February 14, 2021. https://seniorhousingnews.com/2021/02/14/harrison-street-handpicked-12-former-atria-communities-to-acquire-from-healthpeak/.
[27] Chuck Sudo. “Harrison Street Acquires 24-Property Oakmont Portfolio for $1.2 Billion.” Senior Housing News, June 8, 2021. https://seniorhousingnews.com/2021/06/08/harrison-street-acquires-24-property-oakmont-portfolio-for-1-2-billion/.
[28] Mary Kate Nelson. “Kayne Anderson Senior Housing Fund Hits $1.2 Billion Target.” Senior Housing News, April 24, 2018. https://seniorhousingnews.com/2018/04/24/kayne-anderson-senior-housing-fund-hits-1-2-billion-target/.
[29] Tim Regan. “Kayne Anderson Buys 34-Property Medical Office, Senior Housing Portfolio From Welltower.” Senior Housing News, August 5, 2020. https://seniorhousingnews.com/2020/08/05/kayne-anderson-buys-34-property-medical-office-senior-housing-portfolio-from-welltower/.
[30] Nick Andrews. “Largest-Ever Kayne Anderson Fund Closes at $2.75B, Senior Housing a Target.” Senior Housing News, November 16, 2021. https://seniorhousingnews.com/2021/11/16/largest-ever-kayne-anderson-fund-closes-at-2-75b-senior-housing-a-target/.
[31] Tim Mullaney. “Private Equity Surge Raises Apprehensions in Senior Housing Industry.” Senior Housing News, February 11, 2020. https://seniorhousingnews.com/2020/02/11/private-equity-surge-raises-apprehensions-in-senior-housing-industry/.
