Second Quarter of 2016: Three-Year Low in Senior Housing Transactions

By: Richard Englebright.  The drop in senior housing transactions so far in 2016 represents a significant decrease compared to the total number of transactions in 2015 and the lowest number of transactions since 2013. Specifically, according to recent data from the National Investment Center for Seniors Housing and Care (NIC), in the second quarter of 2016 a total of 76 senior housing transactions closed for a total of $1.6 billion. This represents a 61% drop from the first quarter of 2016 when transactions totaled $4.3 billion, an 81% decline from the second quarter of 2015 when transactions totaled $8.7 billion, and the first quarter since the second quarter of 2013 to dip below 100 senior housing transactions. Furthermore, per unit sales are down, with seniors housing units being sold for $163,000 during the second quarter of 2016 on a per unit basis, which represents a $10,000 per unit decrease from a year ago.

The dip is due in large part to the decrease in mergers and acquisitions by senior housing REITs, institutional investors and private equity, all of which began incurring higher borrowing costs in late 2015 due to an increase in interest rates. Furthermore, it appears as REITs have taken a time-out from transaction activity to focus on the portfolios acquired over the last few years of aggressive buying.