Although the stock market performance in 2016 has sent some investors into a tizzy, there’s reason to think the senior living industry shouldn’t be too worried.
The “extreme fear” that currently permeates the market is due, in part, to the fact that there is so much going on outside of the United States, S. Scott Stewart, founder and managing partner of Capitol Seniors Housing, said during a recent Senior Housing News webinar on the financing and investment outlook for 2016. It’s inevitable that this will impact the senior housing industry in some way, he said.
In particular, Chinese market volatility and the dropping price of oil have been causing chaos for months, and the S&P 500 recorded its worst start to a year in history. As of Feb. 12, Japan’s stock market was concluding its worst week since the 2008 financial crisis, with investors rattled by a negative interest rate policy in that country.
“Seniors housing, as attractive as it is, can’t isolate itself totally from that,” Stewart said.
Still, recent stock market turmoil may attract investors to the predictable returns of U.S. senior housing, according to Jason Stroiman, president and founder of Chicago-based Evans Senior Investments (ESI).
As foreign investors pull out of global equity markets, they could possibly find U.S. real estate investment vehicles to be safe havens until the market turmoil plays out, Stroiman explained.
Kris Lowes, a senior associate at ESI, told Senior Housing News he agrees with Stroiman.
“I think there’s a real story there, especially as overseas investors pull out of those markets,” Lowes said.
“Seniors housing is a great place for consistent returns,” he added. “There’s a real chance that investors may look at that track record and come in.”
Senior housing was determined to be the most recession-proof real estate asset class during the Great Recession. Additionally, the seniors housing market continues to show great promise as a long-term growth industry thanks to the underlying demographic fundamentals implicit in future resident demand, Stroiman said.
“In seniors housing, I’m still very bullish for the next 18 months,” Stroiman said.
Still, share prices of major senior housing companies such as Brookdale Senior Living (NYSE: BKD), HCP Inc. (NYSE: HCP), and Ventas Inc. (NYSE: VTR) plunged last week, as forecasts for 2016 were troubled by a variety of factors. These included the ongoing Emeritus integration at Brookdale, a major HCP tenant that is underperforming, and oversupply exposure in some Ventas markets.
But, ultimately, stock market performance isn’t necessarily the best gauge for industry fundamentals—a point made by Lowes.
“The volatility doesn’t always tell the economic truth,” he said.
“When you boil everything down, you want to focus in on fundamentals, and I think the fundamentals of the [senior housing] sector are the strongest they’ve ever been,” Stewart said.
Written by Mary Kate Nelson