(Cover detail from McKnight's Dealmaker's Handbook 2010)

Institutional buyers are showing increased interest in seniors housing as public investors pull back, National Investment Center for Seniors Housing & Care Chief Economist Beth Burnham Mace told those attending a McKnight’s Online Expo session on capital market conditions on Thursday.

In 2015, public investors such as real estate investment trusts represented 53% of the $22 billion in seniors housing transactions, Mace said. By 2017, however, the percentage represented by public investors in transactions had dropped to about 23%, she added.

By contrast, in 2015, institutional buyers represented about 15% of the overall transaction volume, but that percentage increased to 40% in 2017.

“If you look at the deals that are getting down and who the buyers are, you can see that a lot of that these days it tends to be private equity,” Mace said. “Blackstone is significantly involved in this sector right now. They had been out and now they’re coming back into the sector.”

Public REITs may have pulled away from seniors housing in part because their cost of capital has increased with rising interest rates, she said. Also, the trusts are “digesting” the many purchases they made in 2014 and 2015, Mace added.

“A third [reason] would be that they’re starting to sell assets that they don’t believe are accretive to their portfolios,” she said, adding that prices that are perceived as expensive might be a fourth reason. The rolling four-quarter price per unit for seniors housing is $180,000, according to NIC MAP data, Mace said, which is “hovering at peak,” and it is $80,000 per skilling nursing unit.

“So it could be any number of reasons why we’re starting to see the shift,” she said.

Total dollar volume of transactions was up in 2017 over 2016 ($16.7 billion versus $14.5 billion, respectively) but down from approximately $22 billion in 2015.

McKnight’s Online Expo sessions are available for listening online. Use the link here to register or log in.

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