Press "Enter" to skip to content

Senior Housing Sales Volume Fell 46% in 2020, But Investor Confidence is Rebounding

Covid-19 caused senior housing merger and acquisition activity to fall significantly in 2020. The numbers are even more striking when compared to 2019, a year that saw investor appetite for the product reach unprecedented levels.

There are continuing signs, however, that investor confidence is returning to the space and having a positive impact on M&A activity. Sales volume for the first quarter of 2021, while still down over the previous year, increased by mid-double digits on a sequential basis. And there is growing consensus that the worst of the pandemic is behind the industry, and investors intend to increase their exposure to senior housing as the year progresses.

These are the main takeaways from a new investor survey and trends outlook report released Wednesday from commercial real estate services firm JLL (NYSE: JLL). The company’s capital markets research and valuation advisory teams sent the survey to 250 transactional professionals specializing in senior housing and care, and received over 60 responses. 

Investment sales professionals and debt providers accounted for 23% and 21% of respondents, respectively. Private equity and real estate investment trusts followed, representing 19% and 13% of respondents, respectively.

Senior housing transaction volume plummeted 46% last year, closing at $6.5 billion. Total senior housing and care transaction volume, which includes nursing home sales, fell 43% from 2019’s levels, to $10 billion.

While some investors expected acquisition opportunities to arise during the Covid-19 pandemic, sales of distressed properties represented 2.1% of total volume when it peaked in the third quarter of 2020. As of the first quarter of 2021, senior housing distressed loans made up only 1.2% of those type of loans for all commercial real estate.

Senior housing valuations were down 8.1% in 2020 compared to 2019, and average capitalization rates for senior housing grew by 80 basis points to 6.7% in the first quarter of 2021.

The decrease in M&A activity coincided with debt and equity providers retreating to the sidelines in the pandemic’s early weeks in the spring of 2020.

The lending environment gradually stabilized, spurred by private equity investors filling the space left behind by debt providers and institutional investors. Private equity investment accounted for 61% of senior housing acquisitions last year, according to the survey’s respondents. That tapered in the first quarter of 2021 to 47%, as institutional investors return to the space sourcing deals.

The institutional buyers that did business last year primarily targeted independent living and assisted living assets, at 41% and 27%, respectively.

Assisted living has emerged as the primary target of investors in 2021, a reversal of prior trends favoring more lifestyle-focused options such as active adult. Around 37% of respondents identified assisted living as the most sought-after product class by investors.

Investment activity increased 31% in Q1 2021, closing with $2.4 billion in volume — the highest quarterly volume since the pandemic began. This indicates “a tempered return of investor confidence,” the survey’s authors wrote. 

Future activity will be paced by a growing pipeline for value add assets. Ted Flagg, senior managing director of M&A and co-head of JLL’s health care group, told Senior Housing News earlier this month that there are nearly $5 billion in value add opportunities on the market, mainly occupancy-impacted communities and properties that no longer fit the investment criteria of public and private REITs.

The post Senior Housing Sales Volume Fell 46% in 2020, But Investor Confidence is Rebounding appeared first on Senior Housing News.

Source: For the full article please visit Senior Housing News

Be First to Comment

    Leave a Reply

    %d bloggers like this: