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2017 Transaction Volume Down Slightly From 2016

The 2017 preliminary closed transactions data is in and it shows a slight decline in dollar volume compared to 2016. Seniors housing and care closed transaction volume in 2017 registered $14.1 billion, which included relatively weak second and fourth quarter transaction volume. The $14.1 billion includes $7.9 billion in seniors housing and $6.2 billion in nursing care.  The total volume was down 2.8% from the previous year’s $14.5 billion, but down 35.5% from 2015 when volume came in at $21.9 billion.  If these figures hold as we finalize the 2017 numbers then it will be the lowest year in closed transactions volume since 2012.

If we take a deeper look at seniors housing and nursing care separately, we see that seniors housing volume was up but nursing care was down from 2016. Seniors housing saw a 4.5% increase in volume from $7.5 billion and nursing care was down 10.8% from $7.0 billion last year.

Comparing volume on a quarterly basis, seniors housing and nursing care in the fourth quarter of 2017 registered $2.1 billion which is down 37.6% from the $3.4 billion a year ago in the fourth quarter of 2016 and the lowest quarterly volume since the second quarter of 2013 which registered $1.7B. In comparison to the previous quarter, volume was down 59% as the third quarter of 2017 came in at $5.1 billion.  A large portion of that $5.1 billion in the third quarter was the $2.1 billion Sabra acquisition of Care Capital Properties. That $2.1 billion transaction was a main driver of the comparison decrease in nursing care volume in the fourth quarter as nursing care was down 64% from the third quarter. Seniors housing was down 50%.

Of the $2.1B in the fourth quarter of 2017, seniors housing made up $900 million and nursing care made up $1.2 billion.

As noted above, one of the weak quarters for closed transaction in 2017 was the fourth quarter. The fourth quarter is historically a strong quarter compared to the rest of the year.  However, in 2017 it represented the lowest in terms of dollar volume. Not only was the dollar volume the weakest in the fourth quarter, but the number of deals closed was also the smallest of the year, which is highly unusual.  Sometimes we’ve seen a very large deal closed within the year that skews the dollar volume in the first, second, or third quarter, but when looking at the absolute number of closed deals, you mostly see the fourth quarter as highly active.  Of course, one main reason for this could be the wait-and-see approach as the tax overhaul was unfolding as 2017 came to a close. Time will tell if deals were delayed into the first quarter of 2018, or perhaps the second quarter.

Smaller Transactions Dominate

Continuing further analysis when it comes to the number of deals closed, a measure different than dollar volume, we saw the number of transactions closed drop 17%.  According to preliminary data, the number of deals closed in 2017 was 446 of which 90 were portfolio transactions and 356 single property transactions. That compares to 538 transactions closed in 2016 of which 109 were portfolio and 429 were single property transactions.  Over the past couple years portfolio transactions represented 20% of overall closed transactions.  This was even the case back in 2015 when the public buyer type, namely the publicly traded REITs, represented the majority share of buyers. Indeed, single property transactions are very important to the market in terms of the flow of transactions closing, not necessarily the dollar volume each quarter.

As the single property transactions market has been strong, we had seen 16 straight quarters of over 100 total deals close, up until the fourth quarter of 2017.  The fourth quarter of 2017 only shows 84 closing so far.

As far as the size of the deals, small deals of $50 million or less dominated in the fourth quarter, more than usual, representing 95% of all deals closed.

Over the past couple years, as the public buyer type has become less representative of the overall volume, we have seen a significant decrease in large deals of $500 million or more.  In 2015, we saw 10 transactions of $500 million or more and only 9 transactions combined in 2016 and 2017.

Stay tuned for final 2017 figures coming in a February blog along with the latest on buyer composition.

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 Master of Science in Finance from Loyola College in Maryland. He also holds the Chartered Financial Analyst Designation (CFA).
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