Senior Housing Leaders See ‘Tremendous’ Capital, More Deals Ahead

It’s no secret to senior living industry leaders that demand for senior housing is expected to grow as the population of older Americans is projected to double by 2050. And that growth is sparking increased activity in the market, with big bucks flowing in and more players looking to get in on a piece of the pie.

“There is a tremendous amount of capital in the marketplace,” says the National Real Estate Investor (NREI) in an article based on a new study conducted jointly by NREI and the National Investment Center for the Seniors Housing & Care Industry (NIC). The study is based on NREI’s survey of 233 respondents whose firms represent various facets of the commercial real estate industry, from owners, managers and developers to lenders and financers.

Senior housing property sales reached $15 billion last year, and nearly half (49%) of survey respondents expect the volume of seniors housing property sales transactions to increase over the next 12 months, while a nearly equal amount (46%) expect transaction volume to remain about the same. Only 5% expect investment sales to decline, according to the findings.

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REITs, public and private equity firms, and foreign investors are all chasing acquisition opportunities.

“This has been a very aggressive growth period for us for the last four to five years,” Charles J. Herman, Jr., an executive vice president at Toledo, Ohio-based Health Care REIT Inc. and president of the company’s Seniors Housing and post-acute division, told NREI. In fact, the company recently announced plans to acquire HealthLease Properties REIT and its 53-property portfolio for $950 million.

And buyer demand is growing, data show.

Nearly half of survey respondents (45%) said they plan to buy more seniors housing properties over the next 12 months, while 40% plan to hold and only 15% plan to sell property.

Unlike other real estate property types, the seniors housing sector weathered the recession well, NIC data show.

The occupancy rate for independent living properties and assisted living properties averaged 90.5% and 89% respectively during the second quarter of 2014. Independent living occupancy increased by .3 percentage points, while assisted living occupancy decreased by 0.1 percentage points compared to the prior quarter.

“I think people have really begun to understand the great fundamentals in the business,” Lori Wittman, senior vice president of capital markets and investor relations at Ventas Inc. in Chicago, told NREI.

Debt and equity sources have also become more aggressive in pursuing seniors housing loans over the past few years, NREI says, noting that those borrowers with a proven history tend to have more options in the marketplace.

Read NREI’s article “Exclusive Report Shows Robust Investor Demand for Seniors Housing” here.

Written by Cassandra Dowell

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