Senior Housing Execs Expect No Slowdown in M&A Activity Next Year

Many senior housing executives believe there will be a healthy amount of mergers and acquisitions in the year ahead.

That’s according to a new survey from Capital One, a financial holding company headquartered in McLean, Virginia. This year’s take on the annual survey included responses from 147 senior housing and long-term care executives.

Nearly all — 92% — of the surveyed executives predict that M&A activity will at least maintain or exceed the current pace in the year ahead, with 37% of those executives forecasting an uptick in M&As. Just 8% of the executives said they expected M&A activity to contract over the next year.

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As such, 34% of the surveyed executives said they expected real estate term loans for acquisitions to be the most important type of financing for their companies in the next 12 months, while 28% said construction loans and 18% said refinancing of stabilized or repositioned properties.

Courtesy of Capital One

The latest responses resemble those collected in a similar survey last year, when 89% of senior housing and long-term care executives predicted that the pace of M&As would continue through the year, and 43% anticipated an increase in M&A activity.

As for where some of that activity might take place this year, executives identified two U.S. regions: the Southeast (28%) and the West Coast (19%). A sizable portion of executives also identified the Northeast (15%) and the Midwest (13%) as potential hotspots for senior housing opportunity, while fewer said the same thing about the Southwest (10%), Mid-Atlantic (9%) and overseas (6%) regions.

When asked about strategies that would present the greatest opportunity over the next 12 months, 37% of the executives identified acquisitions as their top choice, 25% said repositioning older properties, 24% chose new development and 19% said a sale or exit strategy.

As for the upcoming year’s biggest financial challenges, 48% of the executives said labor cost pressure, while 39% flagged supply and demand imbalances as a potential pain point. Just 10% said the impact of higher interest rates represented the greatest potential financial risk, and a mere 3% identified the availability or cost of capital.

Written by Tim Regan

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