(To read more on the multifamily market, click here.)

LOGANVILLE, GA-Royal Senior Care LLC of North Miami Beach, FL has spotted a seniors housing development niche market 40 miles northeast of Downtown Atlanta and has purchased a 17.82-acre parcel for what local brokers tell GlobeSt.com is a premium price.

Royal Senior Care paid Southern Plantation Development $4.5 million, or about $252,525 per acre ($5.80 per sf), for the tract next to the Southern Plantation seniors housing community it purchased in September. The developer plans to build one-bedroom and two-bedroom villas at Gardens at Southern Plantation, Allen McMurtry of Tampa, FL-based CLW Health Care Services Group, tells GlobeSt.com. McMurtry negotiated for the seller.

Royal Senior Care, a private limited liability company, operates under the brand Royal Gardens Senior Living. The company operates seven seniors housing communities totaling 860 units with a resident capacity of 920 in Florida, South Carolina and Georgia.

The deal was done at this time because the buyer recognized “the supply of properties for sale in this market has diminished,” McMurtry says. “Most sellers, whose properties are ready to sell, have already sold or are in the process.” However, he says his firm “believes supply will increase as many 2006 financials will justify values not achievable in 2005.”

McMurtry tells GlobeSt.com seniors housing acquisitions “remain in high demand from both institutional investors and owner/operators.” But buyers “appear to have become more selective in their acquisitions, as compared to this time last year.” That may be because cap rates “have remained stable for the past six months,” the broker adds.

“The last time the market turned away from a strong sellers’ market, lenders helped facilitate the change with more conservative underwriting requirements,” McMurtry says. “This is one area to monitor to help determine how long this seller’s market will continue. We have seen no movement towards more conservative underwriting yet.”

McMurtry says pricing, “as always is greatly dictated by buyer type [with] institutional buyers continuing to be the most aggressive.” He says buyers “are still willing to pay a substantial premium for portfolios, partially because of the strong interest from institutional investors.” McMurtry notes that “in a competitive bidding environment, confidence in a buyer’s due diligence efforts prior to making an offer is an important factor in selecting who to choose.”

McMurtry tells GlobeSt.com that “in the early years of the seniors housing industry, the mantra was that this is a business and not real estate. While this is true to a significant extent, we believe the underlying value of the real estate is a substantial determinant of value. Part of this change was dictated by the influence of institutional buyers who are more real estate-oriented versus operations oriented.” He notes “strong underlying real estate can provide a safety net in value, should operations falter.”

On the continuing care retirement communities category in seniors housing development, McMurtry says, “we have seen a significant increase in buyer interest in entrance fee CCRCs. While an extremely complicated model, the tremendous barriers to entry have strong appeal, and many new for-profit buyers are coming up the learning curve.”

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