Warburg Pincus moves into senior housing

The global private equity giant has paid $150 million for Brandywine Senior Care.

Warburg Pincus has acquired New Jersey-based senior housing operator Brandywine Senior Care, which owns assisted living facilities in New Jersey, Pennsylvania and Delaware, for $150 million (£81.5 million)  according to Brandywine financial advisor Houlihan Lokey Howard & Zukin. The deal represents the private equity firm’s first investment in the sector.

“Given the population of aging baby boomers, we are targeting the senior housing sector for investments,” Patrick Sullivan, a managing director in Warburg Pincus’ real estate group, said in a statement. “Brandywine is our first investment in this space and we expect to rapidly grow the company through acquisition and development.”

With its first investment in senior housing, Warburg Pincus is moving into a sector many think is primed to take off thanks to the large number of aging boomers. By 2030, seniors will account for almost 20 percent of the U.S. population, a steep climb from the current 13 percent, according to US Census Bureau projections.

With demand for senior housing and its accompanying services expected to surge, investors are rapidly moving into the asset class and many are betting it will become a major piece of the real estate market. Fortress Investment Group recently pumped $1.3 billion into Brookdale Senior Living’s acquisition of American Retirement Corporation, which created the largest senior housing operator in the United States. In the UK, Southern Cross Healthcare, Britain’s largest provider of nursing homes, raised £200 million in an initial public offering on the London stock market last week, reducing the ownership stake of US private equity firm The Blackstone Group from 88 percent to less than half.

This is not the first time that investors have shown strong interest in the senior services market. Many pumped money into the sector in the mid 1990s only to take losses when the bottom dropped out after a change in government regulations.

This time around, many private equity and real estate investors are focusing on residential complexes for active seniors and assisted living facilities versus facilities that provide highly specialized and expensive care to elderly and often seriously ill residents.

Earlier this year, Brandywine sold its skilled nursing facilities in two separate transactions valued at a combined $134 million. In one of those deals, Retirement Residences, a publicly traded Canadian nursing home operator, acquired seven New Jersey facilities for $100 million. In February, Warburg Pincus made an unsolicited offer for the Mississauga, Ontario-based company.

Under Warburg Pincus’ ownerhip, Brandywine will target additional clusters of senior housing both inside and outside the mid-Atlantic region, according to the statement. The company will also change its name to Brandywine Senior Living.

Warburg Pincus already has significant investments in the health care and real estate investment sectors, having sunk more than $1 billion into real estate and $4.2 billion into healthcare-related companies.

The firm also intends to start its first fund dedicated to solely to real estate. Warburg will raise $1 billion for its debut fund, which will look to place half its capital in Asia, particularly China and India, one fourth in the U.S. and the rest in Europe.