Keppel Buying 50% Stake in US Senior Living Provider for $77.3M

Keppel Corporation has agreed to buy half of Watermark Retirement Communities, an American company with 52 senior homes in the US and plans to add eight more by 2020. If the deal is finalised, the purchase price will be approximately $77.3 million.

Under the terms of the agreement, Keppel Senior Living, which operates as a division of Keppel Capital, gets a 50 percent stake in Watermark, according to an August 2nd announcement to the Singapore exchange, as well as giving the branch of one of Singapore’s largest conglomerates half of the minority interests held by the owners of Watermark in assets managed by the company.

“Against the backdrop of fast ageing populations across many regions, demand is growing exponentially for senior care services and retirement communities,” said Loh Chin Hua, CEO of Keppel Corporation. “This acquisition is a strategic move for Keppel to expand into this new growth sector.”

At the end of 2017, Keppel Capital, the asset management division of Keppel Corp, had S$29 billion ($21 billion) of assets under management. The group plans to bring some of Watermark’s solutions to Singapore and elsewhere in Asia.

15th Biggest in the US

Tucson-based Watermark, which traces its origins back to a retirement community opened in 1987, was ranked as the 15th largest operator in the US in terms of total units in 2017 by American Seniors Housing Association (ASHA). Its sites are found around the country, from Bellevue, Washington to Sarasota, Florida, and provide assisted and independent living solutions, Medicare-certified rehabilitation and skilled nursing facilities.

The company specialises in innovative offerings, including educational opportunities, customised dining programmes, arts, memory care and the incorporation of holistic care philosophies. Some of its sites are chosen for their natural beauty or city environments and are in places like Napa Valley, Brooklyn Heights and the Arizona desert.

Watermark was built over the years from acquisitions and the signing of management agreements. It has a total of 9,400 beds in 21 states and $2.7 billion of assets under management. The company’s structure is described as flexible, operating as a manager and through leases, joint ventures and partnerships.

Watermark Already Active in China

Watermark has been especially active in China after entering the country in 2014 with the establishment of Watermark Senior Living China in Hong Kong. The following year, it opened an office in Shanghai, and in 2016 it formed a joint venture with Taiping Insurance for the management of the insurer’s senior living facilities.

Watermark efforts in China have already helped it to secure an agreement to provide technical assistance for the development of an 800-bed facility on Chongming Island in Shanghai for the city government.

The US firm also has a deal to assist with the development of a 630-unit senior living facility in Nanjing as well as a 2,400-unit facility in Pudong for Taiping Insurance.

Aging Populations Drive Interest in Senior Living

Senior homes have proven popular with Asian investors, especially those from China as the region’s demographics shift and countries find themselves increasingly faced with an aging population.

Investors from the country began to buy into the sector in 2015, and by the fourth quarter of 2016 they were behind 15 percent of all senior living transactions in the US, with $493 million worth of acquisitions. The peak was in the final quarter of 2017, at $629 million. Deal flow has all but stopped from China on the government’s efforts to limit investment in overseas properties.

In March 2018, Fosun International did buy 5.11 percent of Brookdale Senior Living for $65 million. The transaction came after Zhonghong Zhuoye Group tried but failed in an attempt to acquire the 1,000-plus centre US senior living company in 2017.