Myriad Factors Behind the Plunge in Seniors Housing Deals - Jonathan Cartu Industrial & Residential Real Estate Firm
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Myriad Factors Behind the Plunge in Seniors Housing Deals

Myriad Factors Behind the Plunge in Seniors Housing Deals


Like other pockets of commercial real estate, the seniors housing market experienced major low points in the third quarter, according to a new report. 

The number of publicly announced seniors housing and care acquisitions in the quarter fell to 58 deals that were announced, a new low according to a report from Irving Levin Associates.

That dip only represents a 3% decline from the 60 transactions in the previous quarter, but it’s a steep 44% drop from the 104 deals made public in the third quarter of 2019. On the bright side, the $1.48 billion spent on third-quarter transactions shows an increase from the previous quarter’s total of $1.36 billion by 9%, based on publicly disclosed prices. However, compared with the third quarter of 2019, when $5.74 billion was spent, dollar volume nosedived by 74%.

“The pandemic continues to stymie dealmaking in the seniors housing and care sector,” stated Ben Swett, editor of The SeniorCare Investor. “Difficulty in obtaining acquisition financing, third-party approvals and property inspections, along with serious questions about the time it will take for occupancy and operations to recover, has caused many buyers to either delay or hit the pause button on dealmaking.”

Another problem is less-than-transparent pricing, in some part because deals have been  so few and far between.

In the seniors housing market, private senior care providers usually comprise the majority of buyers but in this year’s third quarter, they accounted for only 63% of the deals. Not-for-profit buyers were the next busiest group, with 11% of deals, followed by private equity (9%), real estate investors (9%) and REITs (4%).

Private investor O&M Investments was the only acquirer in multiple transactions during the third quarter, completing two deals. The largest trade in the period, and likely the entire year, was Welltower’s $702 million sale of a seniors housing portfolio in the western United States.

A joint venture between AEW Capital Management and Merrill Gardens Senior Living bought the asset, which featured 11 properties across California, Nevada and Washington.

Also during the third quarter, Taurus Investment Holdings LLC and Northbridge Cos. joined forces to acquire six class A senior housing properties for $200 million. Welltower again was the seller of the portfolio, which featured 507 units in suburban Boston submarkets.

Skilled nursing deals represented a minority of third-quarter merger and acquisition activity—as they have during previous quarters—in terms of both transactions (41%) and properties (44%).

“Skilled nursing facilities bore the brunt of the pandemic, especially in the early months, and many owners are waiting for operations to stabilize and to see what happens with federal funding relief before considering a sale,” explained Swett.

Seniors housing deals made up the balance of the quarter’s transaction volume in the segment, with assisted living accounting for 34% of deals, followed by age-restricted communities (12%), independent living (7%) and CCRCs (5%).

A Shift Underway? 

Some market observers report subtle signs of a shift as the year moves to a close. Joel Nelson, CEO of LCS, a Des Moines, Iowa-based senior living company, told CBRE in its weekly podcast that capital is coming back into the development stages, and “we’re seeing some deals that were tabled initially with COVID coming back onto the market. In addition, new institutions and other investors are showing interest in the senior housing sector as they move away from sectors that have been harder hit by the COVID-19 pandemic.

“There’s a lot of new capital that’s reallocating from theaters and retail centers, [and] convention hotels into the space,”  according to Lisa Widmier, EVP of CBRE’s Senior Housing Capital Markets practice, who also participated in the podcast. “And that’s not only just for domestic capital, but we’re seeing an uptick in global interest in the United States senior housing market. So we’re pretty optimistic about 2021.”

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Real Estate Cartu Jonathan

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