Senior housing transactions may have reached a fever pitch toward the end of last year as sellers tried to beat the capital gains tax increase, but more acquisitions are continuing to close in 2013 and industry executives say still more opportunities are in the pipeline.
“The deal pipeline is quite robust,” said Jay Flaherty, chairman and CEO of HCP Inc. (NYSE:HCP), during a conference call with analysts discussing fourth quarter earnings. “Relative to a couple years ago, there are more opportunities presenting themselves in the sense of absolute dollar value [and] more in the sense of absolute number of transactions [along with] the sense of different types of transactions.”
HCP, headquartered in Long Beach, Calif., invested $2.6 billion in 2012, including the $1.7 billion acquisition of the Blackstone/Emeritus joint venture portfolio.
Going forward, Flaherty says that by “squeezing more juice” out of HCP’s existing portfolio through various measures, the REIT will be able to remain “completely opportunistic” when it comes to incremental acquisitions.
Chicago-based Ventas, Inc. (NYSE:VRT) completed $2.7 billion of investments in 2012, with chairman and CEO Debra Cafaro characterizing the $1 trillion healthcare and senior housing investment market as “growing, highly fragmented, rapidly changing, and consolidating.”
“I would say that the pipeline is very active and very large as it has been for the past multiple years. We are in a great sector for external growth,” said Cafaro during a fourth quarter earnings call. “And it’s really across the sector: senior housing, medical office and the government reimburse sectors as well as others, and so we feel really good about the forward environment.”
The Chicago-based REIT’s 2013 guidance assumes about $100 million of acquisitions already under contract and about $400 million of debt financing, assuming no additional unannounced acquisitions.
Health Care REIT (NYSE:HCN) invested nearly $5 billion in 2012, primarily into the private pay senior housing and medical office building sectors. Last year’s pipeline was robust, with the REIT adding a $530 million investment to its Belmont Village Senior Living relationship and expanding its relationship with Brookdale Senior Living by $240 million along with another major milestone: acquiring Sunrise Senior Living.
Already, the Toledo, Ohio-based REIT has completed an additional $2.5 billion of acquisitions in 2013 from closing the Sunrise transaction and buying out several joint venture partners’ interests, with an additional $745 million of Sunrise-related closings anticipated in July.
“We will continue to aggressively look at opportunities both in the senior housing and healthcare sectors,” George Chapman, president and CEO, said during the fourth quarter conference call with analysts.
HCN also plans to divest about $500 million worth of its skilled nursing portfolio. Half the disposition of the REIT’s “nonstrategic” skilled nursing assets is scheduled in 2013. When it’s completed, HCN would have only about a $3 billion portfolio, with $2.6 billion of it operated by Genesis three or four operators managing the remainder.
New
For family-owned seniors housing properties, the REIT's offer an attractive price if the Owners want to continue to manage the Property through a sale-leaseback transaction. The thing to look out for in a sale-leaseback is if the Owner might want to get out of the business before the lease term expires (usually minimum of 10 years) because, depending on the price of the lease, it might be difficult to find another Operator who would assume the lease.
Tips: a) don't enter into a long term lease if there's close to a 50/50 chance you might want to get out of the business during the term of the lease, b) put your options on paper considering your personal, family and lifetime goals & financial costs/benefits associated with each, c) imagine your life with the long term lease obligation and without it, d) and with your trusted advisors, work through which option would be best for you.
Chris Foley
Sr. V.P.
Equity National Seniors Housing Brokerage & Advisors
cfoley@Equity.net
With the lack of new senior product being built over the last 4 years of our recession, and 10,000 people turning 65 years of age daily, it's not surprising that the senior housing units are, and will continue to escalting in sales prices. Why is there still a limited supply of new senior construction starts on the boards. Intererst rates have never been lower and there is plenty of caplital around to invest in an industry with 20+ years of solid growth potential in the front of us..