Investment Trends in Senior Living: A Conversation with Thought Leader Robb Chapin

Despite the challenges of the last 18 months, senior housing still offers investment opportunities. But market knowledge is key to success.

Industry veteran Robb Chapin understands the dynamics of today’s market. Chapin serves as a partner at Bridge Investment Group, a global real estate investment manager with $28.7 billion of assets under management. He is also CEO and Co-CIO of Bridge Seniors Housing Fund Manager, which is invested in 95 senior housing properties and 11,500 units, in 30 states. A third of the properties are operated directly by Bridge Senior Living, a leading senior housing operating company.

Chapin is among the thought leaders attending the 2021 NIC Fall Conference in Houston. The Conference is NIC’s first in-person convening of leaders in senior housing and care since the pandemic began. Many industry leaders plan to attend the Conference to share ideas with others experiencing the same challenges, while also building the relationships to help them succeed in the future.

"We believe there are opportunities to acquire high-quality, newer vintage assets below replacement cost from distressed sellers"

In advance of the event, NIC recently asked Chapin for his investment insights. Here’s a recap of the conversation.

NIC: What investment trends do you see in senior housing?

Chapin: The COVID-19 pandemic yielded the most significant downturn in the sector’s history and has placed a premium on operations. Poorly operated properties were disproportionately affected. While we’re still early in the recovery process, the sector has shown resiliency through a rebound of demand, move-ins, rent growth, and collections. We believe there are opportunities to acquire high-quality, newer vintage assets below replacement cost from distressed sellers. We believe vertically integrated operations are a major advantage to stabilizing staffing, improving quality, and rapidly growing occupancy and NOI. The sector is also attractive because of its “needs-based” character.

NIC: Are there any specific geographies that are more desirable? Property types?

Chapin: We believe target markets for seniors housing are typically in the prime submarkets of the top 100 MSAs where age- and income-qualified demographics are the strongest. Local market demographics, labor availability, health trends, and competitive sets are key to the potential of a particular investment, but we also look to macro trends such as migration patterns, regional trends, economic drivers, and long-term supply/demand factors. We generally seek “modern” buildings with Class A potential, age-in-place acuity mix, desirable unit floor plans, and a full suite of amenities.

NIC: What about new development?

Chapin: In the near term, we believe opportunities to acquire newer-vintage low-occupied buildings below replacement cost can provide attractive opportunities with significantly less risk. However, the demographic trends for the next decade do support supply growth through development. We believe new developments could be attractive opportunities where strategically supported by future demand.

NIC: How has the pandemic impacted investment strategies?

Chapin: As mentioned, we believe the ability to execute on operations is key. Opportunities to leverage our deep relationships with our high-performing operating partners or to take over distressed operations with Bridge Senior Living allow us to optimize value and margins through hands-on operational lift.

NIC: What's the biggest obstacle for the market?

Chapin: The effects of the Delta variant of Covid-19 on the seniors housing market are not completely known, but our operations are far less disrupted than last year and earlier this year. Achieving stabilized occupancy levels by historic standards will continue to be a primary focus. We’re also still challenged by the peak supply growth of 2017-2018 that pressured occupancy across many markets. Another obstacle is the labor challenge. Although it could be somewhat transitory, recruiting and retaining great staffs is always a significant focus. You have to get that right if you expect to be successful.

NIC: What's the long-term outlook for senior housing?

Chapin: The age 80-plus population is expected to increase by 49% from 2020 through 2030. Also, construction starts have already decreased by 60% over recent peak levels due to the pandemic, and it will be several years before we return to historical inventory growth. We believe these factors can provide opportunities to invest in a market that is dislocated in the immediate-term but fundamentally sound in the mid- and long-term.