The seniors housing industry is proving itself to be a safe haven for investors, according to panelists during the the National Investment Center for the Seniors Housing and Care Industry (NIC) conference in Washington, DC. Despite a difficult political outlook, some believe there is still opportunity to be found in the struggling skilled nursing facility (SNF) sector.
Relative to other asset types, occupancy levels for senior housing held up relatively well during the financial criss according to data provided by NIC.
Additionally, as the senior demographic grows at a faster rate than the overall population, demand for housing is expected to skyrocket in the coming years.
“You’ve got an extraordinarily attractive demographic profile. It has a limited penetration rate, [with] a lot of opportunity for incremental penetration rate increase,” said David Roth, the managing director of Blackstone Real Estate Advisors.
While some investors are wary or getting involved in the skilled nursing sector, especially in the wake of a 11.1% reduction in Medicare reimbursements rates and the looming threat of further cuts, other real estate investment trusts (REITs) see great opportunity.
“Clearly it presents challenges for everybody, a time of uncertainty,” admits Richard Matros, CEO of Sabra Health Care REIT. However, “Policy is going in the right direction. There are ways to mitigate what is happening.”
“We’re seeing a greater number of small significant operators who have bootstrapped their companies and can address the challenges,” he says, adding that good SNF operators will be going after “the complex patient,” with different areas of need, rather than focusing on one specific type, such as rehabilitation patients.
However, capital expenditures for SNFs are “dead,” as Matros said, and cutting back on expenditures won’t be enough, prompting a need for REIT-furnished capital.
“REITs are focusing on smaller deals, providing capital to those guys,” he said, adding that his firm sees great opportunity in terms of operators, quality of the asset, and market that it’s in.
“We might be the only ones doing SNF deals for now; we think that will help us faster, it will help us get deals done,” he said. “There weren’t many REITs available for small to midsize operators, we saw a niche… with our operating background.”
In general, the health care sector has shown itself to be promising for investors, said Ted Bigman, the managing director of Morgan Stanley Investment Management, who invests across all property types.
“The REITs [for] health care, [have done] a good job of presenting themselves as a defensive place to put their money,” said Bigman, who only invests in REITs. “The companies tend to outperform, as a defensive asset class.”
Written by Alyssa Gerace