Seniors Housing Business

AUG-SEP 2015

Seniors Housing Business is the magazine that helps you navigate the evolution of the seniors housing industry.

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Page 74 of 87 75 August-September 2015 n Seniors Housing Business By Jef Shaw Based on the latest data of U.S. prop- erty and portfolio sales in seniors housing, 2015 is shaping up to be another strong year on the transac- tions front. According to Real Capi- tal Analytics, deal volume year to date through August was up 32 per- cent compared with the same period in 2014, which also was considered a banner year. But is this a sign of lasting prosper- ity, or is a bubble waiting to burst? Seniors Housing Business asked vet- eran brokers to share their insights on the state and future of seniors hous- ing. An edited transcript follows: Industry trends Seniors Housing Business: What has been the most compelling trend or biggest surprise so far this year in seniors housing property and port- folio sales? Jason Stroiman: We've seen several interesting trends in the seniors hous- ing market so far in 2015. In particular, we've noticed a continued compres- sion in cap rates and a rising level of interest from buyers not currently in the industry. We've also noticed a continuation of high levels of occupancy, which is impressive con- sidering the growing supply of new seniors housing properties across the country. With that being said, we have also noted how quickly inter- ested buyers and large REITs are absorbing these new properties. Richard Swartz: The most compel- ling trend has been the prices per unit paid for premier and high-quality assets. Until recently, per-unit values in excess of $400,000 were very limited. Consequently, it was often diffcult to justify such higher exit values for new development projects in high-density, more expensive mar- kets. These recent higher per-unit price points have thus helped to substantiate these newer higher-end development projects, further fuel- ing the supply side of the market. Bradley Clousing: By far the most signifcant surprise is the creativity in which both REITs and institutional capital are demonstrating fexibility in structuring trans- actions to control quality inventory across all different stages of the asset life cycle. While this buyer pool has traditionally focused on core, stabilized products, many of our recent turnaround portfolios have been funded by institutional capital under a creative arrangement with the operating partners. We have also worked on a num- ber of portfolio transactions where there were developments and assets in lease-up included with core cash-fowing assets. Many buy- ers have realized how diffcult and lengthy the timeline has been to build new assets in quality locations. Flexibility from the institutional players has become increasingly evi- dent to allow them to control these locations through acquisitions rather than just development. Transactions hit new high SHB: The data shows that acquisi- tion prices and volume have reached record highs during the last year or two. How does this change your approach to the market? What Are we in a pricing bubble n Broker Q&A about to burst? Roundtable participants Mark Myers Executive Director Institutional Property Advisors, a division of Marcus & Millichap Allen McMurtry Executive Managing Director DTZ Bradley Clousing Managing Director Senior Living Investment Brokerage Bruce Gibson Principal Senior Capital Advisors Nick Stahler Senior Vice President JCH Consulting Group Jason Stroiman President Evans Senior Investments Richard Swartz Executive Managing Director, Capital Markets Cushman & Wakefeld Top dealmakers discuss record-breaking levels of sales and development in seniors housing.

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