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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76 www.seniorshousingbusiness.com Seniors Housing Business n August-September 2015 advice do you give buyers and sellers in today's frothy market? Allen McMurtry: My approach is to take full advan- tage of this seller's market while it continues. Hav- ing been through a number of real estate cycles, I am a big believer in the inevitability of a market correc- tion. This has been one of the lon- gest seller's markets I have seen, and sellers should be careful trying to time market cycles precisely. Bruce Gibson: Potential sellers must consider how they will redeploy capital gained from the sale of properties. Investors should carefully consider whether it makes the most sense for them to purchase an existing property or develop a new property. Replace- ment cost is well below market value in most instances, but some markets are already saturated and in danger of being overbuilt if some or all of the planned projects come to fruition. It can be much more lucrative to build, but doing so must be done with caution as market and operator selection is the key. Stroiman: Without question, the best piece of advice we offer our clients is to go to market without a listing price. Our marketing approach presents an opportunity for a buyer to come in post-underwriting and make an offer potentially exceeding our client's expectations. How much activity is too much? SHB: How long do you think the market can sustain the feverish activity? Is there any concern that the market is creating a bub- ble that could burst? Swartz: While the long-term threat to the market is overbuild- ing, to date the capital markets have pursued development in a disciplined manner to the extent that most regional markets are not showing signs of overbuild- ing. That said, further loosen- ing of underwriting standards among construction lenders could threaten performance and related values of existing assets given the growing number of new entrants in the development space. Stroiman: We believe that we're currently in the ffth inning of this game. There is plenty more to come in the future. Because of the cap rate spread between seniors housing and multifam- ily, this market is lucrative for a lot of investors. At the end of the day, this is a story of demand, and demand is still at a serious high. Nick Stahler: We believe the market will sus- tain this level of activity as long as all of the current market conditions remain intact. The fundamentals of seniors hous- ing are continually improving. We believe the low interest rate environment and food of equity investing in the sector is what we will have to watch closely. The equity infusion into seniors hous- ing will probably hold strong as long as the interest rates remain low and the returns are higher than those of other real estate asset classes. With that being said, we are absolutely in a pricing bubble that could sustain a pricing cor- rection if the raising of interest rates or other economic issues come into play. Gibson: I really don't think there is much to the idea that there is a bubble as the funda- mentals are quite solid in most markets. However, the most recent studies from NIC MAP suggest that growth in demand will drop slightly over the next few years before the demand starts to surge in approximately seven years." The industry should be on solid footing for the foresee- able future. Mark Myers: Markets always cycle, and this one will do the same. However, if you look at past cycles, you will fnd that the most highly capitalized companies, such as GE, have grown stronger in down cycles, while smaller, weakly capitalized companies tend to struggle most in down cycles. In down times cash is king, and those with the cash can snap up good deals from those who are fnancially drowning. Finding the hot spots SHB: In which segments of seniors housing are you seeing the most transactions — inde- pendent living, assisted living/ memory care, skilled nursing, or C O M M E R C I A L R E A L E S T A T E D E B T , E Q U I T Y & S E R V I C I N G $10,000,000 GARDEN COURT EVERETT, WA | 148 UNITS | LIFE COMPANY $24,990,000 THE ATRIUMS OVERLAND PARK, KS | 203 UNITS | FREDDIE MAC $15,000,000 CARNEGIE VILLAGE BELTON, MO | 204 UNITS | FREDDIE MAC Visit the NEW northmarq.com for transactions, daily rates, expert views and much more! Better Relationships. Better Results. R E C E N T S E N I O R H O U S I N G R E S U L T S W E ' V E D E L I V E R E D F O R C L I E N T S FREDDIE MAC // FANNIE MAE // FHA 20 CMBS LENDERS // HUNDREDS OF BANKS 50+ LIFE INSURANCE COMPANIES

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