A brighter outlook for seniors housing sector
The long-term care market is still struggling, but you wouldn't know it if you attended the National Investment Center for the Seniors Housing & Care Industry conference this week in Chicago.
A sold-out attendance of 1,800 long-term care lenders, borrowers and long-term care operators filled part of the Sheraton Chicago Hotel & Towers. They were looking to make deals, and for some, the fish were biting. Affiliates of real estate investment trusts (REITs) were especially upbeat, NIC leaders pointed out, as they have had relatively easy access to capital, even in these stagnant times. They are aggressive in their pricing and can hook the larger deals. But those other operators trying to start new deals? Perhaps not so much.
And that points to the fundamental problem with the market right now: Debt-capital is still not flowing. It seems to be picking up, but it is far from the heady days of 2007 when it seemed all kinds of lenders were interested in financing deals in the sector. Many have pulled out, and now the segment is struggling to convince the big-name commercial players to return.
It's been tough. A new report about construction isn't too encouraging. As of the first quarter of 2010, construction starts throughout the senior living space had decreased 32% from the prior year.
But there are bright spots. A new report, which will be officially released in October, from the NIC MAP (Market Area Profiles) service finds that occupancy for the assisted living and independent living sector, which peaked in 2007, and then gradually declined, has begun to level off in the past year. (See more on this in our daily news in coming days.)
“A demand-level recovery is exactly what the sector needs,” Michael Hargrave, vice president of NIC MAP, said a press briefing at the conference.
Of course, when and if capital does trickle back in, those experienced operators and those who can show a solid track record will reap the benefits, as NIC President Robert Kramer pointed out.
“Those are real barriers to entry in a good sense,” he told reporters.
And while it isn't a glowing endorsement of a recovery, the sector has weathered the recession and seems to be rebounding better than other commercial sectors, NIC leaders emphasized.So there is sufficient reason to believe that blue skies—or at least less cloudy ones—are ahead. Here's hoping more lenders will be nibbling by next year's NIC conference.