I attended the 25 NIC National Conference – Investing in Seniors Housing and Care – at the National Harbor, Maryland, along with nearly 2,500 other individuals. It was a great conference. Below are my observations:
- The word “stabilize” is the biggest thematic takeaway for me. What do I mean by that? Prices have peaked and have reached a stabilization level. I do not think prices are declining anytime soon or alternatively, CAP rates rising anytime soon, but I also don’t think prices will rise dramatically from here.
- In the sales of senior housing, that is, assisted living and independent living, two metrics prevail – industry cap rates and geographic market desirability. Thus, the valuation starts with the industry average CAP rate and is adjusted upward or downward by the geographic market. Affluent and dense metropolitan areas are the most attractive geographic markets.
- Despite the attractive of the primary metropolitan areas, there was a recognition that the primary metropolitan areas may be saturated with senior housing supply and thus, secondary and non-urban markets are now more attractive and offer more return on investment and upside potential.
- Still a lot of groups chasing a limited number of buying opportunities. Thus, demand for seniors housing and skilled nursing facilities far exceeds the available supply and pipeline for sale. Accordingly, there are a lot of so-called brokers and intermediaries on the prowl for deals. Seems like everyone with no industry knowledge, no financial background, but with a cell phone, has anointed themselves broker. For sellers, the separation of the wheat from the chaff, the experienced intermediary/advisor from the wannabes is now clearer than any other time I can recall.
- The REITs remain the 800 pound gorilla in the purchase and sale of skilled nursing facilities. No private landlord or lender can compete with their cost of capital. Of course, the operator loses control of the real estate and their future options, but they can get into a deal with little equity or cash. Moreover, they do not have their capital tied up in the real estate.
- The seniors housing and skilled nursing facilities sector has definitively arrived as its own unique, specialty real estate asset and investment classification. While this may be obvious to note, this was not always the case. NIC was formed to make this case to the lender and investment community. Kudos to NIC. After twenty-five years, they have succeeded. There have been ups and downs in the availability of capital to this industry and there will continue to be, that’s normal, but we have made it as an investment class…and as a stable and desirable investment class.
I will post other observations as I think of them. I hope you enjoyed the NIC Conference too.