BWE Arranges $240 Million Recapitalization of O'Reilly Development Company Seniors Housing Portfolio in Midwest

BWE announced it has arranged an approximately $240 million recapitalization of a multi-property, Class A seniors housing portfolio located across three major metropolitan markets in the Midwest. BWE served as exclusive capital markets advisor to O'Reilly Development Company, LLC, a Springfield, Missouri-based real estate developer and investor, in capitalizing the transaction. Arrow Senior Living, a St. Charles, Missouri-based operator, manages the portfolio and is co-invested alongside O'Reilly in the venture.

Portfolio Overview

The portfolio comprises purpose-built Independent Living, Assisted Living and Memory Care communities developed and asset managed by O'Reilly Development Company between 2019 and 2022. The assets are geographically diversified across three major Midwestern metropolitan statistical areas.

BWE said the communities are fully stabilized, operating at occupancy levels ranging from 96% to 99%, with in-place net operating income growing materially across trailing measurement periods. The firm also said the portfolio contains additional embedded upside from mark-to-market rent renewals.

Because the transaction is structured as a recapitalization rather than a sale, the $240 million figure represents the amount of the recapitalization and should not be read as a purchase price or appraised value.

Arrow Senior Living Co-Investment and Operating Role

Arrow Senior Living manages the portfolio and is co-invested with O'Reilly, which BWE said fully aligns operator and ownership incentives across the investment. Arrow and O'Reilly have completed more than 16 communities together prior to this portfolio, which BWE described as one of the most established developer-operator partnerships in the Midwest seniors housing market. Arrow's stabilized O'Reilly assets maintain an average occupancy of 96%.

Founded in 2009, Arrow manages approximately 45 communities across eight Midwestern states for owners that include Welltower, Ventas and Kayne Anderson. The company has been recognized as a Great Place to Work and maintains a stabilized portfolio occupancy of 93.5%, below the 96% to 99% range reported for the recapitalized O'Reilly communities.

O'Reilly Development Company Platform

O'Reilly Development Company is a fully integrated developer and investor with capabilities spanning development, construction and asset management, with a primary focus on seniors housing. The firm owns and operates 12 seniors housing communities totaling more than 1,800 units across Missouri, Kansas and Arkansas, with several additional communities in active development. Those communities maintain an average occupancy of 96%. The unit count refers to O'Reilly's broader platform and not necessarily to the assets included in the recapitalization.

Executive Commentary

"O'Reilly has built something exceptional here," said Ryan Stoll, National Director of Seniors Housing Capital Markets at BWE. "Purpose-built, Class A communities, at a great basis, operating at near-full occupancy across three major Midwest markets — that's a track record that speaks for itself. Our job was to make sure the capital markets outcome reflected the quality of this portfolio, and we're proud of what the team delivered for O'Reilly and their residents."

Hunter Hein, President of O'Reilly Development Company, said BWE's approach set it apart on the engagement. "What set BWE apart on this engagement was that they think like owners," Hein said. "Their point of view on how to structure and position this portfolio — and their willingness to be a true collaborative partner throughout the process — drove an execution that exceeded our expectations. On a transaction of this scale and complexity, that alignment of perspective made all the difference."

Market Context

The portfolio combines high occupancy, a recent development vintage and rent renewal upside. Its 96% to 99% occupancy compares with the 93.5% stabilized occupancy of Arrow's broader platform. Communities delivered between 2019 and 2022 are newer than much of the seniors housing stock, though newer properties can still be working through rate resets and operating cost normalization.

A recapitalization can allow a sponsor to monetize part of a portfolio's value, refinance or restructure existing capital, bring in a new equity partner or fund further development while retaining exposure to operating upside.

BWE launched a dedicated seniors housing investment sales platform in 2023, headed by Charles Bissell, and has continued to announce senior living financing activity. Recent examples include a $330 million refinance of an eight-property Class A seniors housing portfolio, a $77 million fixed-rate agency financing for a Class A Midwest senior living community and a $28.3 million permanent loan for Grove City Senior Living in Ohio.

BWE describes itself as a national, full-service commercial and multifamily mortgage banking company with more than 29 offices and a national servicing platform.

Sources

BWE press release: https://bwe.com/press/bwe-arranges-240-million-recapitalization-of-midwest-seniors-housing-portfolio-on-behalf-of-oreilly-development-company/