Examining Investor Sentiment During a Pandemic

Ryan Maconachy, Vice Chairman, Healthcare & Alternative Assets Newmark Knight Frank

Thanks to its multifaceted nature, including components of the hospitality and healthcare sectors, investor appetite for senior housing has been historically high.

The recession-resistant nature of the sector became evident during the 2008-2009 downturn, when it exceeded other commercial real estate property types in terms of investment returns and rent performance, according to the National Investment Center for Seniors Housing & Care (NIC) investment guide.

READ ALSO: The Pandemic’s Senior Housing Capital Stack Impact

However, since the pandemic hit, there have been some anxious moments in the market. Due to uncertainties driven by the virus, it is difficult to predict just how the recovery will unfold. “The industry has been up against some waves we have never seen before,” said Ryan Maconachy, vice chairman of healthcare & alternative assets at Newmark Knight Frank, in a discussion during the NIC 2020 Fall Conference that examined how the deal environment has changed since the pandemic began.

Manisha Bathija, a former investment officer for Ventas, led the discussion, with a panel that also included Ben Firestone, executive managing director & co-founder of Blueprint Healthcare Real Estate Advisors.

CHANGES IN THE DEAL ENVIRONMENT

The COVID-19 crisis has created a highly volatile environment for investors, as “the market is changing on a daily and weekly basis,” said Maconachy. Primarily, the core, best-in-class assets have continued to perform well throughout the pandemic. On the other hand, investors are being more cautious with assets that have been underperforming but were then stabilized, and properties that were never stabilized and are in the lease-up process, he said.

Ben Firestone, Executive Managing Director & Co-Founder, Blueprint Healthcare Real Estate Advisors

In addition, Firestone pointed out that there was a pause in investment in April—however, the market has proved to be resilient and investors will continue to look for opportunities going forward. 

Thanks to favorable demographics, falling caregiving ratios and high divorce rates, the need for senior housing will continue to persist, according to NIC. Nationwide, there are around 75 million Baby Boomers and approximately 3 million Americans turning 65 every year, the Department of Housing and Urban Development reported.

Overall, the investors who have taken a break from senior housing are mostly “tourist investors”—buyers who might have one or two properties, but are not committed to the market, said Maconachy. However, institutional investors that experienced the resiliency of the sector will continue to stay in the industry, he added. According to a recently published report by National Real Estate Investor, 47 percent of investors said that they won’t change their near-term strategies for investing in the sector, and 52 percent reported the same for their long-term strategies.

In general, however, deals do take longer to materialize, due to obstacles created by the pandemic. The work-from-home environment has slowed down the reviewing process and stretched out marketing periods, and limitations to on-site property tours has made it harder for prospective investors to study a property, Firestone said. “I do think there has been an impact to timing, to some degree,” he noted.