Senior Housing M&As Outlook Strong: Capital One

By IvyLee Rosario 

The pace of mergers and acquisitions in the senior housing and long-term care sectors will maintain or exceed the current pace over the next year, with 89 percent of executives predicting so. According to a recent Capital One survey, 43 percent anticipate an increase in activity heading into the fourth quarter of 2017. The survey of more than 150 industry professionals said that the top challenges for the industry are set to be labor costs and supply and demand imbalances, with 33 and 32 percent of respondents saying so, respectively. Of the total, only 4 percent saw availability or cost of capital as their top challenge heading into the next quarter.  

When it comes to opportunities, 37 percent of those surveyed said the acquisition of existing facilities would present the greatest amount of success in the year ahead, with another 30 percent citing the repositioning of older properties. In terms of recent acquisitions, Capital One Healthcare recently secured a balance sheet and agency loans in the amount of $551 million for Kayne Anderson Real Estate Advisors’ acquisition of Sentio Healthcare Properties. On the other end of the spectrum, only 19 percent said that new development would be the best opportunity for investment. 

Financing and Markets 

The focus on mergers and acquisitions brings the expectation that real estate term loans will drive financing, with 30 percent of participants naming this as the most important form of financing for their organizations moving forward. Others surveyed said refinancing and construction loans would be their principal financing need for the year ahead, at 22 percent equally. When it comes to markets, Southeastern and West Coast areas have the highest interest, with 26 and 22 percent of participants citing those areas as the ones that offer the most opportunities. 

“We continue to see an increasing amount of interest in the seniors housing and long-term care industry,” Chris Taylor, managing director, Capital One Healthcare, told Multi-Housing News. “While the overall market dynamics and long-term outlooks are strong, it’s critical that potential investors take a close look at opportunities and assess the particulars of each submarket to see how these challenges are affecting specific areas.”

Graph courtesy of Capital One