CPF Looks for Diamonds in the Rough

CHICAGO—As reported in GlobeSt.com last week, Chicago Pacific Founders has just launched a senior living platform called CPF Living Communities, and officials with the new company say they plan to invest about $250 million in senior living assets over the next three to four years. And Rick Shamberg, the managing partner of Cerulean Partners LLC and a consultant to CPF, tells GlobeSt.com that it's an opportune time to invest in senior-focused properties.

“There is a great deal of new development going on across the nation,” he says, but some of those projects, even ones well-located and well-constructed, could falter. And those projects could provide CPF with opportunities.

“Sometimes class A product in good locations will not have the right management or is ill-conceived in some way,” Shamberg adds, but with the depth of experience at CPF, he believes the group can pick up such properties for low prices and turn them around. “We can find some diamonds in the rough that others have not been successful at.”  

The Chicago- and San Francisco-based CPF team includes John P. Rijos, a founding operating partner and the former co-president and chief operating officer of Brookdale Senior Living. Mary Tolan, also a founder and the managing director at CPF, is the former chief executive officer of Accretive Health Inc.

“This is a good time to jump into this business,” Shamberg says, because even though the population is aging, “the real boom is not coming for a few more years,” at least until the baby-boom generation begins to retire. “This is going to be a high-growth business for the next 20 years, and this will be the first of several funds” that CPF will launch.

In addition to launching this platform, CPF Living just acquired its first two senior living properties. The company bought Echelon Senior Living, an independent living community in Las Vegas, and the Atrium of Belleville, an independent living community in suburban St. Louis. Both properties have another quality that CPF Living will look for: adjacent land that the company can use to add other services such as assisted living and memory care.

CPF Living also acquired a majority stake in Minneapolis-based Grace Management, Inc., which manages senior living communities. “This allows us to own the hardware and the software,” Shamberg says. “The coming generation of seniors will want additional amenities and services, and an owner that uses third-party management will not have enough control” to implement change.

Shamberg says that many of their best opportunities could come about if the coming senior living building boom attracts developers without the proper experience to run these communities. Most experts say this was common during the 1990s construction boom. “Many of these owners did not realize just how significant of an operating business it was; you're delivering healthcare and you're dealing with the emotional needs of seniors and their families.”

CPF Living is interested both in newer facilities and these older properties, he adds. “We're not afraid to buy legacy assets that may need a makeover, especially if it's in a good location. Grace has a great reputation as a turnaround company, and, frankly, that's where we can get the best returns.”