Senior housing deals drop to new low in Q3

Publicly announced acquisitions in the senior housing and care sector fell to a new low in the third quarter, according to a report from Irving Levin Associates. The 58 announced deals represent a 3% decline from the previous quarter — but that’s a 44% drop from the 104 deals made public during the same time period in 2019.

Compared with the third-quarter volume of $5.74 billion in 2019, the $1.48 billion volume for the third quarter of 2020 was 74% lower.

“The pandemic continues to stymie dealmaking” said Ben Swett, editor of The SeniorCare Investor, a newsletter published by Irving Levin Associates. “Difficulty in obtaining acquisition financing, third-party approvals and property inspections, along with serious questions about … the time it will take for occupancy and operations to recover has caused many buyers to either delay or hit the pause button on deal-making right now.”

For the third quarter, senior living and care providers accounted for 63% of all deals. Nonprofit buyers were the next most prolific group with 11% of deals, followed by private equity and real estate investors, each at 9%, and real estate investment trusts at 4%.

The largest deal of the quarter was Welltower’s $702 million sale of a seniors housing portfolio in the western United States. A joint venture between AEW Capital Management and Merrill Gardens Senior Living emerged as the buyer, after a previous attempt by an undisclosed purchaser was terminated at the onset of the pandemic.

Skilled nursing deals continued to represent a small part of merger and acquisition activity, representing 41% of transactions and 44% of properties exchanged.

“Skilled nursing facilities bore the brunt of the pandemic, especially in the early months, and many owners are waiting for operations to stabilize and to see what happens with federal funding relief before considering a sale,” Swett said.

Assisted living accounted for 34% of deals, followed by age-restricted communities at 12%, independent living at 7% and continuing care retirement communities at 5%.