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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58 Seniors Housing Business n August-September 2018 Roundtable participants Damien Carriero Vice President, Seniors Housing Group Colliers International Allen McMurtry Executive Director Cushman & Wakefield Bradley Clousing Managing Director Senior Living Investment Brokerage Kris Lowes Director Evans Senior Investments Adam Heavenrich Managing Director Heavenrich & Co. Mike Mooney Associate Broker JCH Senior Housing Investment Brokerage Ben Firestone Founding Partner, Senior Managing Director Blueprint Healthcare Real Estate Advisors Joshua Jandris Senior Managing Director of Investments Institutional Property Advisors Tim Cobb Managing Director, Senior Housing & Healthcare Investment Sales Lead Berkadia By Jeff Shaw Seniors housing is a turbulent industry. In addition to the market factors that affect all of commercial real estate, seniors housing own- ers and operators have to deal with strict gov- ernment regulations, massive labor concerns and competition from other forms of care such as home health. But the upside is undeniable. The sector has proven to be resistant to many of the ebbs and flows of the economy and offers strong returns. Throw in the future demographic wave of aging baby boomers, and many investors salivate. Seniors Housing Business spoke to a panel of top transaction brokers within the seniors hous- ing sector to see where we stand today, and where we're heading tomorrow, as an industry. Seniors Housing Business: What's the most compelling trend so far this year? Cobb: The biggest surprise is the Welltower acquisi- tion of QCP — the surprise being the plan to integrate the healthcare system with the skilled nursing operations. Several others are also look- ing at similar arrangements. It is very forward-thinking to get in front of bundled pay- ments and managed care. McMurtry: The biggest trend I see is the continued divestiture of assets from the REITs. In the last several years, we have seen them transitioning from net acquirers to net sellers, which has been impactful on the market. Lowes: We continue to be surprised by the number of smaller, regional buyers who have filled in the vacuum from the REITs' pullback from the acquisition market. It seems like every week we talk to a new group that is trying to grow and aggressively look at deals. The rise of these regional buyers demonstrates that the acquisition market continues to be very healthy and in balance from a buyer-seller standpoint. Firestone: Values have held up in light of headwinds, both in the private-pay and skilled nursing markets. New capi- tal coming into the space has clearly supported valuations. Clousing: It has long been the rumor that staffing would be the largest challenge for our industry. The labor cri- sis has now landed front and center in the discussion and consideration of operators and even capital providers in the industry. Secondarily, the quick fall from favor of stand- alone memory care has been surprising. This asset class was in high demand in the capital markets just a few years ago. The higher acuity of residents in memory care right now and sig- nificant development in many markets created shorter resident stays, inconsistent census, and difficulty keeping staff. Looking back SHB: After a feverish pace in 2014-2015, the REITs slowed down their acquisitions/dispo- sitions majorly over the last few years. What's driving this trend? Do you expect it to continue? Jandris: The slowdown is likely to continue as many REITs simply did too many sale-leaseback deals and are now weighed down with rent escalations and occupancy issues. Seniors housing is a cash-flow busi- ness and consumer-demand business. Despite portions of the market that are experienc- ing stagnation, well-located properties with strong cash flow or justifiable upside con- tinue to draw interest from investors. McMurtry: The trend of dispositions in the REITs started mostly in the skilled nursing sec- tor and has now carried over into the private- pay seniors housing sector. Driving these trends is a desire to lessen the exposure to the lower- margin, lower-growth and higher-regulation skilled nursing markets. The REITs have also been trying to diversify their portfolios from a tenant perspective and not have too much concentration with any one tenant. I do expect this trend to continue in the near future. Cobb: REITs have been impacted by share Labor, Penetration, and Overdevelopment Challenge Industry n Broker Insights Seniors housing investment brokers weigh in on the top seniors housing issues for 2018 and beyond. Mike Mooney JCH Allen McMurtry Cushman & Wakefield Ben Firestone Blueprint

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