Cap Rates for Seniors Housing Steady in 4Q Despite Credit Turmoil

By Anuradha Kher, Online News EditorAnnapolis, Md.–Despite the slowing economy, seniors housing and care “held its own” in the fourth quarter of 2007, according to the National Investment Center for the Seniors Housing & Care Industry (NIC). The report is based on NIC’s Key Financial Indicators and is updated quarterly.Capitalization rates remained stable compared in the fourth quarter compared to the previous quarter, according to NIC. Only continuing care retirement communities showed a major downtick – of about 130 basis points – but that was from a relatively small sample of 13 transactions, says NIC. Overall, about 220 transactions were reported to NIC for the fourth quarter of 2007, which came from a survey of all the major appraisal firms that do seniors housing appraisals.Loan volume placed during the quarter also continued to be strong at $1.64 billion. However, it was down both quarter-over-quarter (from $2.15 billion) and year-over-year (from $2.22 billion).“The percentage of performing loans during the fourth quarter continued to be very strong at 99.5 percent,” says Robert G. Kramer, president of NIC. “So far, we’re not seeing any impact in our sector in terms of troubled loan performance. In fact, other seniors housing and care industry metrics would suggest that the performance of loans during the first half of 2008 will be similar to that from the fourth quarter of 2007.”The loan data collected by NIC represents the quarterly lending activity of major national lenders (non-REITs) that make permanent and short-term debt investments in seniors housing and care. This includes data provided by Fannie Mae, Freddie Mac, and several of the larger credit companies and banks.On the occupancy front, percentage rates held steady, particularly quarter-over-quarter. But year-over-year, average independent living occupancy rates were down 200 basis points. More than 3,100 properties reported their occupancy data to NIC during the fourth quarter of 2007, representing about 365,000 units.