Seniors Housing Business

AUG-SEP 2018

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

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46 www.seniorshousingbusiness.com Seniors Housing Business n August-September 2018 Providing: Mezzanine and Subordinate Loans, Preferred Equity, Sims HUD Plus SM , High-Leverage First Mortgages, FHA-Insured Loans n Higher leverage n Flexible structure n Non-recourse financing n Trusted partner Sims is the Right Capital Partner hjsims.com simsmortgage.com Curtis King Senior Vice President, HJ Sims 512.519.5003 cking@hjsims.com Anthony Luzzi President, Sims Mortgage Funding 201.307.9383 aluzzi@simsmortgage.com Your needs. Our can-do approach. Sims Mortgage Funding is a wholly-owned subsidiary of HJ Sims. Member of FINRA , SIPC. tially hold onto properties indefi- nitely — with no set date when the fund will have to sell its prop- erties. That would be a relief for some operators that have gotten used to being sold and resold by private equity funds with short- term plans. "Private equity vehicles with long-term investment horizons provide a great alternative for operators," says Susan Barlow, co- founder and managing partner of Blue Moon Capital Partners, a pri- vate equity fund manager based in Boston. Her firm is now fundraising for its second seniors housing fund, focused on new development and value-added redevelopment, Blue Moon Seniors Housing II. The new fund is expected to close its first round of fundraising early in the fourth quarter. Blue Moon's first seniors housing fund raised $175 million. Fundamentals sag Private equity funds have to balance their eagerness to acquire properties against worries that many seniors housing markets are overbuilt. "We need to be more cautious today than a few years ago," says NIC's Mace. The percentage of occupied apartments at assisted living and independent living properties fell to 87.9 percent in the second quarter in the top 31 markets for seniors housing, according to NIC. That's the lowest occupancy rate in seven years. "Changes in occupancy and, more generally, operating perfor- mance could translate to less-than- expected returns," says CBRE's Whitlock. Most private equity funds tar- get leveraged returns between 12 percent and 20 percent for their clients, but shrinking rent growth could cut into that. However, the basic health of the seniors housing business from a consumer perspective is not likely to be harmed too badly by over- building or even a potential eco- nomic downturn, says Whitlock. "The demographic shift the U.S. will undergo over the next 20 years will provide demand for the seniors housing segment," says CoStar's Rybczynski. "The basic case for investors getting into seniors housing will not disappear anytime soon." However, the overall occupancy rates for seniors housing are not likely to improve until the long- awaited demand from aging baby boomers arrives in 2025 or 2026, says Aron Will, vice chairman and co-head of National Senior Hous- ing Debt & Structured Finance for CBRE Capital Markets. The oldest baby boomers (born in 1946) are now 72 years old. Funds scrutinize deals Private equity funds have become a little more cautious in their investment approach as an increasing number of seniors housing units stand vacant. "Private equity investors con- tinue to gain more experience in their portfolios amid the current market conditions," says Richard Swartz, vice chairman of equity, debt and structured finance of the National Seniors Housing Capi- tal Markets Group at Cushman & Wakefield. "These lessons are reflected in their underwriting of new deals." For example, many fund manag- Bridge Seniors Housing Fund II owns The Carlisle at Palm Beach, Florida. Senior Lifestyle Corp. operates the independent living, assisted living and memory care community, which is just steps from the Atlantic Ocean.

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