Senior living providers are increasingly looking at core-plus asset deals and distress-driven transactions as favorable options, with deal activity in the senior living sector showing signs of a slight rebound this year. A recent survey and capital markets analysis by Cushman and Wakefield, released this week, revealed interesting trends.
Of the 90 senior living executives surveyed, nearly half (49%) expressed interest in core-plus investment strategies. Assisted living was identified as the most attractive transaction type at 33%, followed by active adult communities at 23%.
The senior living transactions market is currently perceived to be at or near the bottom in terms of property valuations. However, there is “renewed interest” from investor and lender groups, indicating a promising future for senior housing investments.
Over a third of respondents indicated a focus on “opportunistic or distressed” asset acquisition strategies. With the recent interest rate reduction announced by the U.S. Federal Reserve, there is hope for relief for owners and organizations seeking growth.
Fifty-six percent of respondents foresee minimal change in capitalization rates in the next 12 months, with debt liquidity and the current interest rate environment being top concerns.
Despite a drop in transaction volume at the beginning of the year, there was a 65% rebound in the second quarter. However, long-term transaction data reveals a decline over a 10-quarter period.
Private capital investment has been growing in the industry over the past three years, with real estate investment trusts (REIT) playing a significant role in the growth.
Distress-driven deals are expected to continue driving transactions in the short-term, fueled by upcoming debt maturities and strong occupancy numbers in active adult communities.
Rent growth in senior living properties remains steady, serving as a counterbalance to industry challenges. However, concerns arise in lifestyle-focused properties due to the slowing residential housing market activity.
The report also highlights geographic variations in occupancy and rent growth, with positive trends seen in certain regions like the Northeast and Mid-Atlantic.
Overall, the senior living industry is facing both opportunities and challenges, with factors like cost pressures and construction rates influencing future supply and demand dynamics.
