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

Seniors Housing and Care Transactions Volume Down in 2Q: Part I

The second quarter of 2016 marked a significant drop in volume for closed seniors housing and care property sales transactions. Volume in the second quarter registered $1.6 billion. That includes $1 billion in seniors housing and $600 million in nursing care. The total volume was down 61% from the previous quarter’s $4.3 billion and down 81% from the second quarter of 2015, when volume came in at $8.7 billion.

Although the volume decrease was more noticeable in the second quarter of 2016, the trend in decreased volume really started back in the third quarter of 2015, when the public buyers (namely, the publicly traded REITs) significantly decreased their activity. This time around, the private buyers (including private REITs) have joined the public side in remaining quiet. Part II of this blog, being released on August 17, will go into greater detail about the buyer types. 

The rolling four-quarter total seniors housing and care volume also was down significantly, decreasing 33.5% from the prior quarter—from $21.2 billion to the now $14.1 billion. This change is noteworthy because it is the first time the rolling four-quarter volume dipped below $20 billion since the fourth quarter of 2014.

Taking a look at nursing care and seniors housing separately, we see that the decline is represented in both of them. Nursing care volume was down 74% compared to the prior quarter, from $2.4 billion to $600 million, and seniors housing was down 43%, from $1.8 billion to $1 billion. Compared to the second quarter of 2015, nursing care volume was down 84% and seniors housing was down 79%. The rolling four-quarter volume in nursing care decreased 36%, from $8.5 billion to $5.4 billion, and seniors housing decreased 31%, from $12.6 billion to $8.7 billion.


Number of Deals Down

In the second quarter, we saw fewer than 100 deals close—something that has not occurred since 2013. Back then, longer-term bond rates were rising as the Federal Reserve indicated that its policy of Quantitative Easing (QE), where it purchased bonds, was likely to change. This proposed change in policy led to the so-called “taper tantrum,” as panic spread in bond markets, yields rose quickly, and government bond prices fell sharply. As a result, we saw some abrupt movements in the capital markets, including a sharp decline in public REIT stock prices, which in turn raised their cost of capital. The second quarter of 2016 saw only 76 total deals close. These are preliminary numbers, but they currently represent a 44% drop in total deals from 136 in the first quarter of 2016. 

Out of the 76 deals closed in the second quarter, 54 were single property deals and 22 were portfolio transactions. Single transactions dropped 50% from the prior quarter, when 109 deals closed. The number of portfolio transactions dropped 19% from 27 to 22. The last time we had such a large drop in deals closed was in the second quarter of 2015 as cost of capital increased due to better expectations for the economy and the expected FED rate hike last year and again abrupt movements in the markets.

When we look at deal size, large deals over $1 billion have been rare, but what’s most noticeable is that we have not seen any deals close in the $250 million to $500 million range for the past two quarters. Those deals have been a solid driver of activity in the past.

On Wednesday: A closer look at buyer types.

Data at the Conference

Hear the recent market trends in seniors housing and care at the 2016 NIC Fall Conference.

Register Now

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).
June 6 2024 NIC Insider Newsletter Now Available Read Now »