The senior living sector has seen nine consecutive quarters of total investment return gains since the second quarter of this year, according to a National Investment Center for Seniors Housing & Care blog post. The total investment return, or the actual rate of return of an investment, for the senior living sector was 0.59% in the third quarter.
“Short-term total returns for senior housing are on par with the broader [National Council of Real Estate Investment Fiduciaries National Property Index], which posted a total return of 0.57% in the third quarter,” NIC Chief Economist and Director of Outreach Beth Burnham Mace and NIC Senior Principal Caroline Clapp said in the post. “Positive income returns for both the NPI and senior housing were partially offset by negative appreciation, reducing the overall investment return.”
The senior living income return in the first quarter was 0.83%, which the experts noted was stronger than industrial properties, which was 0.76%. The senior living return, however, was below the overall NPI, which was 0.93%. The appreciation (capital/valuation) return in the first quarter was -0.24% following four consecutive quarterly gains. Current economic and capital market returns have hurt appreciation returns, Mace and Clapp noted.
“Further, many investors have reduced their appreciation expectations for senior housing as the impact of the coronavirus has weighed heavily on their view of the sector. The appreciation return is the change in value net of any capital expenditures incurred during the quarter,” they said.
Looking over the past 10 years, return for senior living was strong, with total returns equaling 10.14%. This compares with 9.48% for the NPI. Income returns for senior living (5.30%) surpassed the NPI (4.73%), as did the appreciation return (4.67%).
The performance measurements cited for senior living reflect the returns of 189 senior living properties valued at $10.62 billion in the third quarter. The property count and market value were the highest in the NCREIF time series for senior living, NIC noted.
“It’s also notable that the number of properties tracked by this index has grown significantly since the beginning of the pandemic, having been 134 properties in the first quarter of 2020, valued at $6.3 billion. The additional properties may be influencing the overall performance returns of the index,” Mace and Clapp said.
