Senior Housing M&A Activity Surges to All-Time High

The senior housing mergers and acquisitions market continues to bubble with activity across all property types and reach new heights annually and quarterly, according to the latest report from Irving Levin Associates, Inc.

The second quarter of 2014 saw 60 publicly announced senior care M&A transactions, the highest volume ever recorded for the period, up form 56 acquisitions during the second quarter of 2013, according to The SeniorCare Investor, an Irving Levin publication.

Stepping back to take a bigger picture look at the M&A market for the first half of the year, acquisitions were up 53% from the prior year’s period to 123 announced deals during the first two quarters of 2014.

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Compared to years past, 2014 has already shaped up to be a record-setting period well before its end.

“This level of activity is unprecedented in the seniors housing and care market,” stated Steve Monroe, editor of The SeniorCare Investor newsletter. “More transactions are getting done in six months than in the entire years of 2008, 2009 and 2010. 

The surging deal volume has also led to higher dollar amounts among total transaction values. In the first half of the year, the total value of the transactions reached $10.8 billion, a 137% increase from the first half of 2013. In the second quarter alone, total transaction values were $5.2 billion, 78% greater than the same period a year. 

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“The capital inflow to the seniors housing and care sector continues to grow as more investors view the market not only as a strong real estate sector with above-average returns, but also one that has proven to be recession resistant,” Monroe stated. 

A number of factors continue to contribute to high M&A activity and the growing dollar volume being pumped into the sector, including lower cost of capital, increased interest and willingness from lenders to get involved in the market, as well as a number of new participants in turn spurring greater competition.

“In addition, there has been an increase in new players in the acquisition market, who are able to take advantage of the low cost of capital available,” Monroe stated. 

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In particular, health care real estate investment trusts (REITs) and smaller, non-traded REITs, have increased their M&A activity by more than 50% in the first half of this year when compared with the first half of last year, according to the data.

“Combined with a rise in private equity groups looking to cash in on the relatively high real estate returns, the total supply of capital for senior care acquisitions has now approached that in the last senior care bull market of 2006 and 2007,” Monroe said.

As long as interest rates remain low, the high levels of acquisition volume will continue, however, risks remain.

“The only dark cloud on the horizon could be the increasing pace of new development if all the assisted living and memory care communities that are being discussed actually get built,” Monroe stated. “That will be when the cracks begin to appear in this bull market.”

Written by Jason Oliva