A place for connections, analysis, research, and education on seniors housing and care

Closed Transaction Volume Down Significantly in Q2, But Pick Up Likely Later in the Year

There have been numerous high profile deals announced over the past couple months which should drive the volume higher by year-end. However, transaction dollars that closed in the second quarter of 2017 were down significantly, which was mostly driven by the decrease in seniors housing volume.

Compared to the first quarter, seniors housing volume dropped significantly which was mostly due to the decrease in institutional buyers. To be fair, the first quarter institutional buyer volume was mainly from one company, Blackstone, which bought out some properties from HCP and Welltower, representing a total of $1.9 billion for those two deals. That said, closed volume was still weak for the second quarter which, at least preliminarily, represented the lowest volume for seniors housing and care since the first quarter of 2012.

Preliminary Second Quarter Data

Transactions volume for seniors housing and care in the second quarter registered $1.4 billion, with $873 million in seniors housing and $573 million in nursing care. Total quarterly volume was down 69% from the first quarter’s $4.6 billion and down 45% from a year ago, when volume totaled $2.6 billion in the second quarter.

Both seniors housing and nursing care volume decreased from the previous quarter. However, as mentioned above, the main driver was the decrease in seniors housing. Seniors housing volume declined 78% from the first quarter when volume registered a relatively strong $4 billion. Nursing care volume also declined, but only 6.4% from the first quarter’s $613 million.

So why the large decline in volume? Well, it needs to be put it in perspective. As stated previously, the first quarter of the year had a couple large seniors housing deals close with Blackstone registering $1.9 billion of closed volume from just two deals. Putting aside those two first-quarter deals, there was a decline in seniors housing in the second quarter, but, of course, not nearly as much. One could argue that when large deals close in a given quarter, it will be hard to beat and/or match that trend in the following quarter. And that’s what we had in the second quarter. However, let’s also put the quarter in perspective with the trend over the past few years and mention, again, it was relatively weak. The reason for the weakness was not only the drop in the institutional buyer volume, but the continued weak volume from the public buyers as well.

The Buyers in the Second Quarter

The exhibit below shows the trend in each buyer’s share of volume by year going back to 2008. Note that 2017 represents data through the second quarter. The trend in the public buyer type since 2015 shows a significant drop off starting in 2016, which has continued in 2017. It only represented 19% of the volume in the second quarter. In addition, the public buyer type accounted for only $269 million in the second quarter of 2017. When compared to an average volume per quarter from 2011 through 2015 of $3 billion, this represents a significant drop over the last 18 months.

Turning to institutional volume, it only represented 13% of the volume in the second quarter with $191 million. Over the past 8 quarters before this last quarter, the institutional buyer averaged $1.2 billion in volume so it seems there has been a possible slowdown in the institutional volume, at least according to preliminary figures.

However, the decline in the institutional buyer is only one quarter of data. As such, we should not factor significant weight on one quarter, but we will monitor this trend as new data becomes available.

Topics: Research

About the Author

Bill Kauffman

Senior Principal Bill Kauffman works with the research team in providing research and analysis in various areas including sales transactions and skilled nursing. He has lead roles in creating new and enhanced products and implementation of new processes. Prior to joining NIC he worked at Shelter Development in investing/acquiring, financing, and asset management for over $1 billion in assets. He also had key roles in the value creation and strategic planning and analysis for over 65 entities. He received his Bachelor of Business Administration in Finance from the College of Business and Economics at Radford University and his Master of Science in Finance from Loyola College in Maryland. He also holds the Chartered Financial Analyst Designation (CFA).