Q1 Seniors Housing Transaction Volume Cools
However, 76 percent of seniors market investors say they plan to increase their exposure in 2022.
The uncertainty of how serious a new Covid-19 variant could affect the leasing activity of assisted living communities seems to have influenced some buyers to stay on the sidelines,
Peter DeMangus, chief marketing officer, Solterra Companies, shared that sentiment with GlobeSt.com following data released by LevinPro LTC that after a record-breaking fourth quarter for seniors housing, activity fell by 9 percent Q1 2022.
REITS, private real estate investment firms and private equity accounted for a third of Q1’s 127 transactions. LevinPro reported that one-third of PE deals were for majority-SNF assets and the remainder was for seniors housing deals.
JLL is Bullish
However, one quarter’s worth of deals does not necessarily mean the year will bea lackluster for the sector. “Even though acquisitions decreased from 140 transactions in 4Q2021 to 127 deals in 1Q2022, that does not necessarily mean acquisitions will slow for the remainder of 2022,” JLL managing director Brian Chandler, co-lead for the seniors housing practice, valuation advisory, tells GlobeSt.com.
“The 1Q2022 acquisition data is still 51 percent higher than Q1 2021 deals that were made public at that time which is another important data point. Based on our JLL Seniors Housing & Care investor survey, the investor sentiment indicates market participants grow more bullish on seniors housing and care investment, with 76% of respondents indicating that they intend to increase their exposure to the sector in 2022.
There is plenty of capital/liquidity in the market, he noted, REITs are continuing to sell their secondary market product and more core funds are entering the space.
Additionally, Chandler said, capital for commercial real estate investment continues to accelerate to all-time highs, reaching $243.7 billion in February 2022.
And despite the distress the market suffered during the pandemic, demand still remains solid, he added.
“Keep in mind, seniors housing was the only asset class to achieve more than a 10% investment return over 10 years since 2008-2009. Overall, long-term opportunities for investors remain quite attractive, particularly for institutional capital looking to diversify their portfolios or hedge against oversold investment classes.”
Transaction Values Increasing
Michael Lincoln, principal at GreenRock Capital, a provider of C-PACE financing to the senior housing industry, pointed out to GlobeSt.com that while the number of senior housing M&A transactions in the first quarter slowed from the previous quarter, the dollar volume was essentially flat.
“This would suggest that the transactions are getting larger, which makes sense as we are seeing an increase in multiple site acquisitions and affiliations which can take more time and are more complicated to execute,” Lincoln said.
“I don’t see the trend toward consolidation abating in a meaningful way. The structural fundamentals of demographic demand, an average age of plant at close to 20 years, and the need for owners and operators to manage risk through portfolio diversification while creating efficiencies from size and scale will remain in place. We are bullish on further investment in the sector.”