Focus Healthcare Partners has completed the final closing of its Focus Senior Housing Fund II, raising $370 million, the Chicago-based real estate investment and asset management firm announced last week.
FHP targets investments in the active adult, independent living, assisted living and memory care areas. The firm primarily is focused on acquisitions, but it also will assess development, distressed debt and preferred equity opportunities. Since 2010, FHP has acquired approximately $1.5 billion in senior living real estate assets across multiple US markets.
“We own senior housing assets, and we partner with operators who manage the buildings for us,” FHP Principal and co-founder Curt Schaller told the McKnight’s Business Daily on Tuesday.
The new investment fund is 20% larger than Focus Senior Housing Fund I, the company said in a press release, “despite a challenging fundraising period for commercial real estate.” Investors in FSHF II include university endowments, state and corporate pension funds, insurance companies, wealth managers, family offices and “other top-tier institutional investors, according to the company.
Like other private equity investors, Schaller said, FHP raises investment vehicles that typically have a defined life of approximately 10 years. “They’re typically structured with an investment period of about three years,” he said, “and then you’ve got the rest of the time to create the value in the assets you buy.”
Fundraising environment
After fully investing FSHF I, he said, the company began fundraising for the new fund in 2022. It took two years, Schaller said, because of the difficult fundraising environment in general in real estate.
“A lot of institutional investors are leery of what’s going on in the general real estate market,” Schaller said. “A lot of them feel they’re over-allocated in real estate because they invest in bonds, real estate, stocks, and a lot feel that they’re overexposed in real estate right now.”
The result, he said, is that many investors are pulling back on the real estate market, making it more difficult to raise funds.
But Mike Feinstein, a managing director with FHP, noted in a press release that the time is ripe for investing in senior living due to demographics. More than 70 million baby boomers, those born between 1946 and 1964, will be aged 65 or more years by 2030.
“Massive growth in the 80+ population segment and near-term limited supply growth, coupled with the current capital markets dislocation, will provide ample opportunities for our investors,” Feinstein said.
New construction focus
Schaller said Tuesday that FHP’s investment strategy with Fund II will be similar to the strategy in Fund I. One difference will be that the company is looking at investing in new construction in addition to acquisitions of existing properties.
Because of strong demographics and the limited amount of new construction going on, it’s a good time to build, Schaller said.
Incubation Capital Partners acted as the exclusive adviser for the FSHF II fundraise.
