NIC Notes

Insights in Seniors Housing & Care

By: Bill Kauffman  |  February 15, 2017

Update to 2016 Property Sales Transactions Data

Economic Trends  |  Senior Housing  |  Skilled Nursing  |  Workforce

This post is a follow-up to last month’s transactions data blog post, providing updated data for the fourth quarter of 2016.

Volume and Deals Closed

Property sales transactions volume for seniors housing and care in 2016 registered $14.4 billion, with $7.8 billion in seniors housing and $6.6 billion in nursing care. Total annual volume was down 34% from 2015’s $21.8 billion, and down 25% from 2014, when volume totaled $19.0 billion.

As stated in the initial blog last month, 2016 started out as a tumultuous year in the capital markets. The significant increase in cost of capital most likely delayed the finalization of some deals, as we did not see the strong bounce back in deal volume in the second quarter as we had seen the past couple of years. Only $2.6 billion closed in the second quarter of 2016 after a relatively strong first quarter of $4.3 billion.

Then story is more positive when you look at transaction activity purely from a count of closed deals. From this perspective, the number of transactions was still relatively robust in 2016, with 513 deals closed. Transaction count was down 9% from 2015, when 563 deals closed—a record high for this database that dates back to 2008. In further comparison, 414 transactions closed in 2013 and 556 in 2014.

Finally, 138 deals closed in the fourth quarter of 2016, up from 121 in the third quarter.

Private Buyer Steady, Public Activity Down, and Institutional Volume Up

In 2016, the public buyer volume was down 72% when compared to 2015, from $12.7 billion to $3.6 billion. The public buyer represented only 25% of the buyer volume in 2016 compared to 58% representation in 2015. There were many reasons for the decrease in public buyer activity, including some public REITs becoming net sellers and the challenging cost of capital throughout 2016, especially in the beginning of the year.

The private buyer type, which includes non-public operators, owners, and partnerships, stayed consistent between the past two years: $5.9 billion closed in 2016, as strong demand from an acquisition standpoint continued from that group. This group has consistently closed more than $1 billion each quarter, a trend reaching back to the third quarter of 2013. This past quarter registered $1.1 billion.

The institutional buyer actually increased by 40% from 2015 to 2016, from $3.1 billion to $4.4 billion, as more institutional capital became active over the past year.

Seniors Housing Price Per Unit Down Slightly Year Over Year

The price per unit for seniors housing ended 2016 at $170,600. It has oscillated between $170,000 and $180,000 for the past couple years. While volume has decreased, the bid for properties is still relatively strong but has decreased from the peak of $181,700 in the second quarter of 2015, and has decreased in the latest year-over-year comparison.

On a year-over-year comparison, seniors housing price per unit is down 4% from $178,500 and down 3% from the previous quarter. However, it is up over 200% from its cyclical low of $58,500 in 2010.

The pricing for nursing care in 2016 saw significant increases in the price per bed. The price per bed for nursing care ended at $95,200 in 2016, which was up 25% from 2015’s $76,300. Several high-priced transactions that closed in 2016 contributed to the increase, including the Welltower sale to a Chinese life insurance company and its investment manager, Cindat. The 28 nursing care properties in that transaction traded north of the $200,000 price per bed mark. In addition, there have been numerous smaller transactions and one-off transactions trading over $100,000.

In the March NIC Insider, I’ll provide additional details and commentary on the latest transactions data from the NIC MAP® Data Service. Be sure to check out the Insider online.

Seniors Housing and Skilled Nursing Market Trends at the 2017 Forum

What is the economic outlook for 2017? How will changes in fiscal and monetary policy affect access to capital? What market trends will influence your investment strategies or business plans this year?

Join the 2017 NIC Spring Investment Forum, March 22–24 in San Diego, to get the latest macroeconomic trends and NIC data on the seniors housing and skilled nursing sectors, including occupancy rates, supply and demand conditions, and a comparison of metropolitan market performance across the U.S.

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About Bill Kauffman

Senior Principal Bill Kauffman works with the research team in providing research and analysis in various areas including sales transactions and skilled nursing. He has lead roles in creating new and enhanced products and implementation of new processes. Prior to joining NIC he worked at Shelter Development in investing/acquiring, financing, and asset management for over $1 billion in assets. He also had key roles in the value creation and strategic planning and analysis for over 65 entities. He received his Master of Science in Finance from Loyola University Maryland and holds the Chartered Financial Analyst Designation (CFA).

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