Top: Sabra’s Talya Nevo-Hacohen; Bottom, from left: Marcus & Millichap’s Todd Lindblom, NIC Chief Economist Beth Mace, Freddie Mac’s Kathleen Ryser and NIH’s Michelle Kelly

The future of senior living post-pandemic is healthcare-based, and it will be more difficult for operators who don’t take that approach to maintain a leg up, speakers said Thursday at a senior housing investment webinar hosted by Marcus & Millichap.

“Investors who are interested in senior housing have to understand that it’s a healthcare model and they are investing in a fundamental business that is about delivering in-patient healthcare,” said Talya Nevo-Hacohen, chief investment officer of real estate investment trust Sabra Health Care REIT. “That is different from what a lot of investors have thought in the past.”

Despite that change, however, the industry is well-positioned for the pandemic to be just a short blip on the road to long-term growth, Nevo-Hacohen noted. That’s not necessarily the case for harder-hit sectors such as office and retail.

“Seniors housing has been deeply affected by the pandemic, in the short term, for sure,” she said. “But there are enormous tailwinds on the demographic front. There are a lot of people who are going to be looking for a place to be safe — pandemic or no pandemic — and the demand function is going to be very strong.”

If anything, Nevo-Hacohen added, this change should serve to create a lower-risk premium in senior housing, eventually driving cap rates lower and pricing higher. 

Michelle Kelly, senior vice president of investments at National Health Investors, agreed, noting that the firm continues to seek acquisitions within the industry despite the challenges now related to underwriting.

“We can’t just look at trailing history and say it’s likely to be a signal of future performance,” she said. And when it comes to the types of assets they’re focusing on, Kelly said that NHI is looking for stressed, but not necessarily distressed, acquisitions.

“We’re not very good at fixing things that are very broken,” she said. “But if it’s an asset that’s stressed because it’s up against a debt maturity, for example, with bloated expenses, and we think a new operator could come in and right-size it, that would be a better fit.”