ARC Healthcare II Grabs 12-Asset Seniors Housing Portfolio

SunnyBrook, Fairfield, Iowa

By Barbra Murray, Contributing Editor

American Realty Capital Healthcare Trust II Inc. has made one of its largest purchases since its first buy in May 2013, with the acquisition of a group of 12 SunnyBrook seniors housing communities in Iowa. The REIT shelled out $164.2 million for the assets, increasing its portfolio by 680 units.

The properties were built between 2003 and 2009 and are located in the Iowa cities of Burlington, Carroll, Fairfield, Fort Madison, Mt. Pleasant, Muscatine, Cedar Rapids, Clinton, Des Moines, Independence, Ottumwa and Tipton. Commercial real estate and capital markets services provider HFF marketed the assets on behalf of the seller, an individual who’d built up the portfolio over the last 20 years.

“This time in the market is extremely aggressive, and the seller saw it as a good opportunity to capitalize on that and fully realize his returns,” Ryan Maconachy, managing director with HFF, told Commercial Property Executive.

Iowa’s seniors housing market may not have the prominence of, say, Florida’s, but ARC HC II was hardly alone in its interest in the 93 percent-occupied collection of assisted living and memory-care communities. The 563,900-square-foot SunnyBrook portfolio was “aggressively bid,” Maconachy said, with approximately 10 to 12 groups—public and private REITs, private equity and pension funds—making a play for the portfolio. The final price tag represents a cap rate of approximately 7.2 percent.

“It’s a little more aggressive than ’06 cap rates,” added Maconachy. “Cap rates are as low as they’ve ever been for this sector.”

ARC HC II relied on proceeds from its ongoing initial public offering of common stock to finance the acquisition of the SunnyBrook properties. As of Aug. 22, the offering has yielded nearly $1.9 billion.