Long-Term Care, Assisted Living Deal Values Spike in 2019

A notable dropoff in megadeals has not slowed investor interest in long-term care and assisted living properties, because the industry remains attractive to investors who recognize managing rising costs and population health remain priorities.

Notably, deal value for long-term care assets, which includes assisted living, saw the largest increase in multiple value versus the previous time frame last year, compared with other health care sector — a 4.5 times growth in mean enterprise value/EBITDA. That’s according to PricewaterhouseCooper’s (NYSE: PWC) year-end U.S. Health Services Insight report.

Long-term care and assisted living deal volume paced a 7.3% increase in the second quarter of 2019 compared to the same time period a year ago. There were 543 health care transactions in the first half of 2019, with long-term care accounting for 41% of total deal volume. Long-term care transaction volume decreased 3%, year over year.

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Q1 2019 saw 261 deals completed, and another 281 deals closed in the second quarter. This marked the seventh and eighth consecutive quarters with over 250 deals in the health services sector. The sector has had at least 300 deals per year since 2015.

London-based professional services firm PwC analyzed data from Irving Levin Associates platforms, as well as Dealogic Equity Capital Markets Analytics, S&P Capital IQ and publicly available transaction information.

In addition to eight consecutive quarters with 250 or more deals, the industry has recorded over 200 deals per quarter since Q1 2014.

senior housing transactions Courtesy of Pricewaterhousecoopers
This graph shows health care real estate deal value and volume from Q3 2017 through Q2 2019.

Deal volume for the first half of 2019 marked an 8.9% decline year-over-year.

To date, there has been only one long-term care deal valued at over $1 billion: in June, Chicago-based health care real estate investment trust Ventas (BYSE: VTR) acquired a Canadian senior housing portfolio of 31 existing properties and four in development through an 85%/15% equity partnership with Le Groupe Maurice (LGM). There were 13 health care deals valued at over $1 billion in 2018. That deal was valued at $1.8 billion.

Heading into 2019’s second half, PwC expects deal interest to continue, driven by regulatory uncertainty related to the future of the Affordable Care Act, capital availability, and cross-industry trends such as health system mergers and megadeals such as CVS’ $70 billion acquisition of Aetna last year.

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