Real estate investment trust Welltower agreed to buy more than two dozen apartment complexes specifically designed for independent, older adults from developer Affinity Living Communities for nearly $1 billion in a bet on demand as the baby boomer generation is entering its peak retirement years.
The portfolio, containing almost 3,900 units mostly in the Pacific Northwest, will expand Welltower’s real estate into markets where the five-year growth estimates for the 55-and-over population is 2.5 times higher than the national average, the company said.
"Our Wellness Housing portfolio helps address the significant and growing unmet demand for wellness focused rental housing for seniors,” Shankh Mitra, Welltower's CEO, said in a statement. “These communities provide thoughtful amenities and targeted social programming for empty nesters and active adults at moderate price points.”
The partnership comes as an aging baby boomer population is expected to generate a surge of retirees in the next 10 years, according to a senior housing study from real estate firm JLL. Citing data from the U.S. Department of Health and Human Services, the report said more than 10,000 people turn 65 years old every day in the United States.
Those changing demographic trends are expected to push population growth among Americans aged 75 and older to 44% in the next decade compared a 5% growth among the population at large.
At the same time, the pipeline of senior living communities has been hampered by similar forces holding back development in the rest of the commercial real estate industry, including high interest rates and the increasing cost of construction and labor, the report said. As a result, starts in the fourth quarter were down more than 50% from peaks in 2021 and 2022, while rents for senior housing have increased 17% since 2020.
Under the terms of Welltower's off-market deal, Spokane, Washington-based Affinity will continue managing the 25 properties in the portfolio while Welltower will assume $523 million in debt at 3.8% with a nine-year weighted average maturity.
The rest of the $969 million total purchase price with be funded with cash on hand. Total cost per door is roughly $249,000 and brings Affinity’s total portfolio of age-restricted housing to nearly 25,000 units. The deal is expected to close in pieces in coming months, depending on property-level loan assumption approvals, the company said.
Facilities within the portfolio rent for $2,100 on average, with an average length of stay at nearly four years, according to Welltower. That's nearly double multiple estimates for stays in traditional multifamily residences that average slightly more than two years. Current asking rents across the United States are $1,673, according to CoStar data.
A typical Affinity-built property also includes 30,000 square feet of common amenity space and extensive resident-led programming meant to foster a sense of community.
Over the past three years, senior housing has been among the largest sectors of alternative investment, along with student housing and medical offices, according to JLL. The combination of high move-in rates coupled with below-average inventory has made the asset class increasingly popular among investors seeking growth outside traditional sectors.