The seniors housing industry saw its transaction volume spike
last year to levels not seen since the peak years of 2006 to
2007.
More than $25 billion in transactions closed in the space last
year, with the bulk of those—nearly $20 billion
worth—coming from the seniors/health-care REIT
sector, according to market research firm National Investment
Center for the Seniors Housing and Care Industry.
The big REITs such as Ventas and HCP got bigger last
year—together they accounted for nearly $15
billion in portfolio deals. And while overall transaction volume
isn't likely to match last
year's surge, interest from private players is
growing from both domestic and cross-border investors.
“There is substantial room in this industry
for investors beyond the REITs—in fact, most
owner/ operators would prefer alternatives to the
REITs,” says Mel Gamzon, president of Fort Lauderdale,
Fla.–based Senior Housing Investment Advisors,
and a 30-year veteran of the industry. “The
equity is mostly coming from here, in the U.S., but the last couple
of years, the amount of foreign investors has been
increasing.”
In 2011, Gamzon's firm closed more than $250
million in four large portfolio deals, and three of those deals
were with cross-border investors from Asia, Canada, and the Middle
East.
“Essentially, seniors housing is a need-based,
defensive real estate strategy, and those are big, glaring words to
foreign investors,” says Gamzon.
“What else out there is really
need-based?”
Demographics are clearly on the industry's
side: More than 10,000 Baby Boomers turn 65 each day, a trend that
began only last year. Currently, occupancy rates on seniors housing
(not including skilled nursing facilities) average around 90
percent nationwide, a 200 basis point improvement from a year ago,
according to the American Seniors Housing Association.
Yet, it's the need-based aspect of seniors
housing that's driving its success. The average
age of those entering independent living today is around 82,
whereas just five years ago that figure was in the high 70s. An
increasing number of owner/operators, such as Chicago-based Senior
Lifestyle Corp. and Kirkland, Wash.–based
Merrill Gardens, have enhanced their operating capabilities to
accommodate residents as they age in place.
“We're finding that
independent living is blending a bit more today with assisted
living,” says Gamzon. “Seniors are
entering independent-living facilities at an older age, and
there's either a real or perceived need for
services.”
The fortunes of the independent-living sector have historically
been tied to the for-sale market—seniors
won't move into a new community until they can
sell their homes. But the integration of more health and wellness
services has helped the independent-living sector bounce back after
a few tough years.
While access to capital—particularly
construction financing—is still difficult, in
many respects that's another wind in the
sector's sails.
“In many markets, this industry remains
undersupplied, so we're looking at several
years, at least, of limited new housing production,”
says Gamzon. “It's patient
money that's in the marketplace today, and
that's very good news for the
business.”