NIC: Big Deals Boost Senior Housing M&A in First Quarter

Senior housing transaction dollar volume rose by a decent amount during the beginning of this year, mostly thanks to large acquisitions made by institutional buyers such as private equity firm Blackstone. That’s according to the preliminary data for the first quarter of this year from the National Investment Center for Seniors Housing & Care (NIC).

Total volume in the first quarter of 2017 totaled $4.4 billion, an increase from the previous quarter driven primarily by a few large deals that closed in the early months of the year.


Blackstone’s $1.125 billion acquisition from HCP (NYSE: HCP) of 64 properties leased to Brookdale Senior Living (NYSE: BKD) made up roughly a quarter of that volume. Blackstone also purchased a Senior Lifestyle portfolio for $747 million from Welltower (NYSE: HCN).

“The surprising part was not the fact that institutional buyers were acquiring properties,” NIC Senior Principal Bill Kauffman told Senior Housing News. “But somewhat of a surprise was the large amount that the institutional buyers represented in Q1, which was significantly more than the previous quarter, and more than we have seen in a while in terms of representing a significant portion of the buyer volume.”

For reference, the start of 2016 also saw $4.4 billion in deals closing. Last quarter, senior housing transaction dollar volume was $2.3 billion, marking a weak end to the year.


REIT action slows

Continuing a 2016 trend, public companies such as REITs were less active buyers in the first quarter. Volume attributed to these companies fell 36% to $421 million. That’s down from an already anemic volume of $657 million in the fourth quarter of 2016, NIC reported.

Public buyer volume was at $920 million in the first quarter of 2016.

“I think the trend is clear,” Kauffman said. “Public REITs have become more of a seller over the past year, year and a half.”

Public companies currently only represent 9% of total buyer transaction volume. REITs have backed off buying for several reasons, such as cost of capital increases, new construction coming online, and higher property prices, Kauffman noted in a Thursday blog post.

Institutional buyers like Blackstone and international investors have stepped up to acquire some of the REIT assets. Institutional buyers now make up 61% of buyer volume, a seismic change from only 15% of that volume in 2015 and 31% in 2016.

Purchases by private buyers, such as private REITs and private partnerships, declined by 26% from last quarter. Still, this was the 15th consecutive quarter with private closings totaling $1 billion or more.

Written by Tim Regan

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