Are glowing acquisition reports a cause for optimism, or concern?
Taken collectively, two recent reports show that last year was a great time to sell a property in this field — and this year may be even better.
That may be good news for the movers and shakers. But is it an encouraging sign for the sector overall? It depends.
First, a quick recap. On Monday, a press release touting Steve Monroe's upcoming Senior Care Acquisition Report reviewed why 2014 was a banner year on the real estate side.
Among the highlights: Skilled nursing beds were sold for an average of $76,500, a 4% increase. That's respectable. But look what happened to assisted living: Units were sold for 25% more, or just a smidge below $189,000 on average. Not to be outdone, sellers of independent living communities realized a 28% increase, to an average of $246,800 per unit. Probably safe to say more than a few sellers are now acquiring luxe living accoutrements.
As the late night infomercials are wont to exclaim, wait, there's more. More in this case happens to be a rosy acquisition forecast, courtesy of Marcus & Millichap.
“Seniors housing investments are poised for an exceptional year as questions surrounding how the Affordable Care Act would affect the sector have faded,” the report notes. Analysts credit improved economics and a recovering housing market, along with heightened investor demand.
These are both solid, well-researched reports that should reduce anxiety among investors in the sector. And there's probably no harm in that.
But can we also read in good things for owners, operators and managers? The answer — again — is that it depends. If you are looking to unload property that's profitable, well-managed and has obvious strategic value, this is a great time to be alive. Your holdings are likely to fetch a pretty penny.
Unfortunately, such people represent only a fraction of those who are running communities these days. For those not cashing in this year, the reports may not make much of a difference. And they might even be signs of trouble ahead.
One reason is that people looking to buy things must often stretch every nickel to do so. As a general rule, buyers are not looking to add staff. They may not say they are going to lop off heads. But let's just say that they will be likely looking for, ahem, greater efficiency.
The reality is that this field is experiencing both an evolution and revolution. The evolution is the result of constant pressure to find new and improved ways to deliver the best housing and care possible. The revolution is being driven by the clever thinkers who are redefining what senior living truly means.
What none of us really knows yet is how the evolution/revolution combo platter will ultimately play out. But if history is any indication, tomorrow's winning strategies will likely blindside what's now viewed as state of the art.
These reports may give us some reason for optimism about the bigger picture. But it would be dangerous to confuse them for the whole story.
John O'Connor is McKnight's Editorial Director.