Real estate: Clearer vision -- Seniors housing may not be as data-rich as other real estate sectors. But the quality of available information is improving

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Tell someone his personal gesture is "transparent" and you need to watch out for a possible uppercut to the jaw. But comment about transparent information to somebody who might pump money into the long-term care sector and you're liable to get a hearty handshake.

When it comes to investing in long-term care – and there are precious few who can operate without thinking about investors nowadays  -- transparency of financial information is the name of the game. In short, being able to assess the financial picture more clearly greases the wheels to more deals, and injects a sector with energy.
This is particularly true for a sub-category of real estate like seniors housing. The good news is the sector has come a long way in mustering enthusiasm for capital formation; huge challenges remain, however, to get bigger investors consistently involved.
"There aren't many specialty asset classes with as much data available," acknowledges Geoff Dohrmann, publisher and editor-in-chief of the Institutional Real Estate Investment Letter, Walnut Creek, CA. "It's surprisingly well-populated with good data."
He praised groups such as the National Investment Center for Seniors Housing and Care (NIC), the American Seniors Housing Association and others for their collaborative efforts.
But, he cautioned, much more infomation and perspective are needed.
"What's really missing now is performance data. That will help them benchmark," Dohrmann said. "They need to know how equity investments in there are performing. That's a transparency that's not there. What kind of returns can I expect over a long time and what volatility will there be over a long time?"
He also called for more reporting standards, "so numbers reported always are meaning the same thing," he explained. "It's probably not true in seniors housing yet, but it needs to be. People are always looking to see if they can understand what the numbers mean."
The chairman of the executive committee of the American Seniors Housing Association put one of the sector's challenges another way.
"Unfortunately, transparency isn't just having data available but understanding what the data means," said Noah Levy, also a principal in seniors housing with Prudential Real Estate Investors, Parsippany, NJ.
So what does the seniors housing market need now?
"More consistent infusion of equity investment capital, as opposed to it being internally generated. There's just too much debt in the market and not enough equity," Dohrmann said.  "As it becomes more legitimate, more institutional capital comes in."
A big step toward greater legitimacy would be to achieve an index listing with the National Council of Real Estate Investment Fiduciaries (NCREIF), Chicago.
It should be a long-range goal, said NCREIF top exec Blake Eagle: "Only recently have the institutional investors started to consider this sector. We are a long way from having enough data to where our research committee and academic advisors would approve developing investment measures for (these) properties."

Stepping out
NIC, however, made a major step in the right direction last year with the unveiling of its MAP (Market Area Profiles) project. It gathers performance information on more than 7,200 properties in the top 30 metro markets. NIC officials consider the project a crowning achievement as the group approaches its 15th annual meeting in September.
"Seniors housing still lags behind other major classes such as apartments, retail and office in providing timely market data," acknowledged Ray Braun, CEO of Health Care REIT, Toledo, OH, and a  MAP project co-chair. "But the whole MAP project is designed to fill that gap. I'd say it's getting us 75%-80% of the way down the road."
Braun said two things are needed to get to the next level, and the taskforce plans to address both: expanding beyond the original 30 leading market areas and collecting expanded data, such as on operating income and expenses. This would help satisfy some of Dohrmann's suggestions.
NIC's mission from the start has been to better educate investors about the seniors housing sector. The mission has grown to include helping educate seniors housing managers. To that end, NIC first helped kick off coursework run through Johns Hopkins University and more recen