Private equity firm IRA Capital has launched a $500M closed-end fund focused on the acquisition of medical properties and senior housing assets in the U.S. IRA Healthcare Real Estate Fund will target the acquisition, development and financing of healthcare assets in high barrier-to-entry and supply-constrained markets. The California-based company projects the fund will have annualized net returns of 14% to 16%.
"We intend to acquire assets across the risk spectrum with a focus on core-plus and value-add opportunities,” IRA Capital co-founder Jay Gangwal said in a statement. “The diverse strategy will result in a balanced portfolio with a combination of yield and appreciation, while providing downside protection given the needs-based demand."
The fund is open to both institutional clients and high net worth investors, including domestic and foreign endowments, pension funds, insurance companies and family offices. Southern California-based IRA's principals are adding their own capital to the fund, according to the release.
The push to acquire healthcare and senior housing assets comes as the sector slowly recovers from pandemic-era financial challenges, inflationary pressures and decreased occupancy.
Overall occupancy at senior housing facilities was around 78% in April, up 5% from pandemic lows but still down from the 87% seen before the global health crisis.
The healthcare sector was at a moment of “peak volatility” in February, according to Spencer Levy, global client strategist and senior economic advisor at CBRE. The near-term uncertainty is being exacerbated by high interest rates, but Levy said an expected peak of rates later this year will present opportunities for buyers as asset values are likely to increase in one to two years.
“The current capital markets environment is also presenting unique re-positioning opportunities that we expect will create significant value and generate outsized returns,” Gangwal said.
IRA was founded in 2010 and invests in a range of commercial real estate assets with a concentration in the medical and healthcare sector. Its recent acquisitions include the July 2022 purchase of two medical office buildings totaling 21K SF in Vista, California, that are mainly occupied by Scripps Health.
In February 2022, IRA secured $80.7M in acquisition financing from CIT, a division of First Citizens Bank, to acquire an 86K SF surgical hospital and specialty care facility in Naples, Florida, and an 84K SF surgical hospital in Alexandria, Louisiana. A month earlier, it also acquired two 80-unit assisted living and memory care communities in California, paying Capital Health Group $106M for the properties.
IRA signaled at the time that it would increase its investment in senior housing, pledging to invest $1B in the next two years to acquire more than 2,000 housing units. The company said it would initially focus on West Coast assets before expanding outside of the region to find opportunities with more scale.
The purchases came after IRA sold off 56 healthcare and life sciences assets in two transactions. The firm in 2021 sold a 29-building portfolio of healthcare and life sciences assets across the U.S. for $620M to Nuveen Real Estate. The portfolio included 750K SF across 27 healthcare properties and two fully leased life sciences properties totaling 420K SF. A year earlier, the firm sold a 19-property portfolio for around $300M to Welltower REIT.
"Our firm's expertise and exceptional track record in this niche asset class combined with strong secular trends uniquely positions us to deliver strong risk-adjusted returns for the Fund," Amer Kasm, co-founder at IRA Capital, said of the new healthcare fund.
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