Despite Recent Slowdowns, Senior Living M&A Still Alive in 2023

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Senior living dealmaking volume is still well below where it has been in the past as macroeconomic conditions make deals harder to ink.

But that doesn’t mean this year will be a total wash in the end, either. Market conditions are still evolving, and there’s still time left this year for the pace of transactions of senior living properties to quicken. While deals aren’t penciling out at the same rate compared to last year, senior living deal brokers and investment insiders say well-positioned operators will continue to purchase properties as values remain low.

Although the pace of transactions and values were rising before the Covid-19 pandemic, the disruption stopped that rising tide. Increased interest rates have made completing new deals harder than they were in the past, and as seen in recent past quarters, operators and lenders need to get more creative than ever before to see a deal cross the finish line.


Tough hurdles netting debt financing and the threat of continued Fed interest rate hikes are no doubt still hampering M&A activity in 2023. Even so, this year is not expected to be a total bust for senior living transactions — as long as dealmakers can be creative and flexible in the months ahead, that is.

“I don’t believe this year can be considered a wash,” said SLIB Senior Vice President Dave Balow. “Coming into the year most firms had cautious optimism and I would say that overall this year’s total transactions have exceeded where I thought we would be.”

Other brokers shared Balow’s view. Chicago-based Ziegler Managing Director Dan Revie noted a busy pace of transactions among smaller, single-site operators that are looking for help. And VIUM Capital Executive Managing Director Steve Kennedy acknowledged that due to persistent headwinds, the year has been slower than typical, with buyers getting highly selective of the assets they pursue.


“We’re not seeing some of the almost unhinged values of pre-pandemic,” Kennedy said. “I think there was this carryover where sellers still had those lofty expectations but if they wanted to transact, they had to reset those expectations.”

Savviness in dealmaking

The second quarter was slow for much — but not all — of the senior living industry with regard to M&A. While headwinds continue to weigh on M&A, brokers have gotten more creative to keep deals flowing through their pipelines.

Overall, the senior living industry saw 25% fewer transactions in the second quarter of 2023 compared to the same period last year, according to data published recently by LevinPro LTC. Transactions were up in the second quarter from 99 transactions reported in the first quarter of this year, but the 110 disclosed transactions in the second quarter were down from 147 in 2Q22, the LevinPro data set shows.

And the 110 transactions seen in the last quarter amounted to the second-fewest number of senior living M&A transactions in a quarter since 1Q21, when 85 deals were reported.

That trendline of transactions increasing in the second quarter was also noted by Glen Ellyn, Illinois-based SLIB, which in the second quarter reported 30 transactions worth a total of $250 million in value, according to Balow.

“We knew the year was going to be a fight in terms of getting deals done and navigating these headwinds,” Balow said. “The second quarter has been great for us.”

Balow said he feels that investment and brokerage firms have gotten “a little more savvy” over the last 15 to 18 months in learning how to transact while balancing the headwinds from interest rates.

Even amid the challenges, Balow said SLIB is looking to exceed its yearly record for transactions of 83, set in 2021.

‘We’re very surprised at how the second quarter shook out, mainly because that may have been our best quarter ever as a firm in terms of total transactions,” Balow said. “We’d love to have that feather in the cap that we got the record in one of the most challenging markets we’ve seen.”

That surprise in the second quarter, Balow said, wasn’t just specific to SLIB, noting that other firms were also reporting similar healthy bushels of transaction slips, while others are remaining on the sidelines until calmer conditions prevail.

In a time when SLIB brings out potential transactions before buyers, Balow said it was common to have six to eight offers. Fast-forward to today and that buyer pool has shrunk to between one and two buyers.

“So that’s having a negative impact on deals getting done, just a lack of competition we were able to create,” Balow said. “If it’s more of a distressed turnaround deal, financing is still very difficult.”

Well-positioned buyers are able to transact at will, bringing strong lending relationships to the table when seeking new inventory, Balow said.

Columbus, Ohio-based VIUM Capital reported 11 financings totalling over $350 million in the second quarter of this year. The projects included bridge, HUD and tax-exempt bond financings for 57 separate properties in 10 states. The company is coming off of closing a $1.1 billion securitization in the first quarter, according to Kennedy.

Chicago-based investment bank Ziegler is tracking a “record number” of transactions this year, according to Revie. That’s fueled by a number of transactions on the nonprofit side of the senior living coin, he told Senior Housing News.

That comes as providers tracked a record number of transactions for nonprofit senior living communities and skilled nursing facilities in 2022, according to a January report issued by Ziegler.

Where the challenges remain are on the lending side, Revie said. That’s where some deal-making creativity comes in as buyers work with their lending partners to structure deals. Creativity in senior living M&A, observed by Revie, include procuring seller notes, mezzanine financing, lease-to-purchase agreements, or a combination of those options.

“That’s plugged the gap somewhat in terms of the debt side, but it’s still challenging,” Revie told SHN. “Buyers are still looking at their prior lending relationships but it’s a question of whether they can get debt they’re accustomed to getting.”

But conditions may improve “at some point” when lenders actually do what their titles entail: Lend money to see returns, Revie said, which could lead to more activity in the space.

As it stands, buyers are leaning heavily on past lending relationships to get a deal to the finish line, Balow said.

Kennedy added that those long-standing lending relationships held by operators can bring more trust to the table with a proven track record of operational success when taking on new debt as opposed to a new borrower without experience and without a “proven sponsor.”

“It’s important for operators to maintain a close stable of lenders that when you have that ebb and flow of interest in the market, they’re there with you,” Kennedy said. “Our appetite changes as market factors change and right now we continue to be pretty bullish.”

Positive outlook, but slog still ahead

Even with the headwinds that have raged for the last 18 to 24 months across the senior living landscape, those involved with the daily grind of penciling out transactions say that the outlook for the dealmaking in the space remains bright, with the caveat that normal conditions are still a ways off.

Kennedy said he anticipates that there will be more senior housing-based M&A activity to come, starting in the fourth quarter of next year, with pent-up capital potentially coming off the sidelines.

“I think we’re as far as a year behind with senior housing transactions,” Kennedy said. “We’ve got Q4 of next year starting to hopefully see the kind of M&A activity that we’re seeking currently in the skilled nursing space in senior housing.”

Kennedy added that VIUM projects “significant” HUD loan activity in the second half of this year with 19 projects currently submitted to HUD totaling around $165 million and an additional 31 transactions engaged for HUD funding totaling over $300 million. That said, VIUM is on pace to close 12 bridge loan transactions in the third quarter of this year totaling over $280 million, Kennedy added.

Revie said in the short-term he doesn’t expect “any major catalysts” to change the pace of senior living transactions “upward or downward” from where the market currently stands.

“I don’t really see anything that’s going to drive volume up or down at least in the next couple of months,” Revie added.”

Buoyed by strong second quarter performance, Balow said SLIB was hopeful that the trending figures would be a “springboard for how the rest of the year is going to look.”

“Our pipeline for closing is extremely strong across the country and we’re evaluating new opportunities earlier,” Balow said. “We’re very optimistic that the second half of the year can be even stronger than our first half.”

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