Interest in Senior Housing Investment Surges, Prices Stay Flat

The rest of this year may prove busy for senior housing dealmakers, according to newly released survey results from the fourth annual National Real Estate Investor (NREI)/National Investment Center for Seniors Housing & Care (NIC) Seniors Housing Market Study.

For the survey, NREI polled 153 commercial real estate professionals this past July about senior housing.

From the sound of it, there’s plenty of interest in acquiring senior housing properties this year.

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About 47% of survey respondents said they intend to purchase senior housing properties within the next 12 months. That’s up from the 38% of respondents who said the same thing in last year’s survey.

Meanwhile, approximately 42% of respondents intend to hold onto properties, while 11% plan to sell assets.

All the while, a large chunk of respondents don’t believe that sales volume will change all that much over the next year. That’s contrasted by 39.3% of respondents who anticipate sales will increase, and 12.7% who believe sales will decline. 

The majority of survey respondents also seem to think that the prices of senior housing properties will drop this year. Specifically, 52% of respondents said they think cap rates will increase over the next 12 months, whereas 20% expect they will decrease and 28% predict they will not change.

Deal pricing holds steady

Deal pricing in the senior housing industry has remained relatively constant so far this year, according to separate data from NIC, also released Wednesday.

The average price per unit of senior housing properties totaled $170,700 in the second quarter of 2017. That represents a 1.5% drop from the $173,400 per unit recorded in the first quarter of 2017, but a 6.1% increase from the $160,900 per unit recorded in the second quarter of 2016.

Over the last four quarters, the average price per unit of senior housing has fluctuated between $165,000 and $175,000.

The number of seniors housing and skilled nursing deals closed fell by just 10% during the second quarter of 2017, though transaction dollar volume fell by 58%. Of the 113 closings in the quarter, 89 were single-property deals and 24 were portfolios.

What’s more, approximately 95% of the senior housing and skilled nursing deals in the second quarter of 2017 closed for $50 million or less, representing the biggest share of deals closing in that price range since the fourth quarter of 2010. 

“In summary, the main takeaway here is the fact that pricing remains competitive when properties are coming to market,” NIC Senior Principal Bill Kauffman wrote in a blog post summarizing the data.

Despite overall deal volume falling in the second quarter and the public real estate investment trusts (REITs) acting less aggressively, pricing stayed strong due to bids coming from other sources, including private equity and smaller private buyers, Kauffman added.

“The demand for properties is still strong and capital from investors is still plentiful, even in the somewhat challenging environment,” he concluded.

Written by Mary Kate Nelson

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