Senior Housing M&A Activity Down 44% Compared to 2019 Levels

The coronavirus pandemic is having a deleterious effect on senior housing and care M&A activity – especially when compared to a historic landscape a year ago when all buyers were in the space looking for opportunities.

The third quarter of 2020 ended with 58 announced deals totaling $1.48 billion in transaction volume, according to acquisition data from Irving Levin Associates. That is a 44% decline year-over-year.

The pandemic has depressed deal volume for two consecutive quarters. Irving Levin also recorded 60 transactions in the second quarter of the year. The third quarter numbers represented a 3% dropoff, sequentially.

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The silver lining in these numbers: The dollar volume represented a 9% increase sequentially. But, the majority of that total is credited to one deal: Welltower’s (NYSE: WELL) $702 million disposition of its stake in 10 communities operated by Merrill Gardens, which acquired the portfolio in a joint venture with AEW Capital Management.

But smaller deals drove M&A activity the last few years, and capital has yet to return to the space in a major way to restart that activity, Ben Swett, editor of Irving Levin Associates’ The SeniorCare Investor, told Senior Housing News.

Private senior care operators are driving the current deal volume, accounting for 63% of deals recorded in the third quarter. They were followed by private equity (9%), real estate investors (9%) and real estate investment trusts (4%).

Assisted living communities accounted for 34% of deals, followed by age-restricted communities (12%), independent living (7%) and CCRCs (5%).

It is too early to tell if the fourth quarter will show signs of a reversal, but M&A activity started strong in the first half of October.

“We have seen a burst of activity in the first couple of weeks of the fourth quarter, both in big deals and small ones,” Swett said. “But we will have to see if this level of dealmaking continues throughout the fall and into the winter.”

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