December 16, 2019
Over the past decade, seniors housing has shifted from “mom-and-pop” individual owner operators to a viable institutional investment. Now more than ever, the seniors housing marketplace is drawing interest from a broad swath of debt and equity capital providers.
At the 2019 National Investment Center for Seniors Housing & Care (NIC) Fall Conference, KeyBank Real Estate Capital® executives participated in panel discussions about how deals are being constructed in this sector. Most agreed that despite a few obstacles, there will be plenty of activity in seniors housing.
There are a number of reasons for this. For starters, new debt and equity providers continue to enter the space, increasing competition and introducing varying structures and pricing. The Federal Housing Authority (FHA), the U.S. Department of Housing and Urban Development (HUD), and the government-sponsored enterprises, Fannie Mae and Freddie Mac, are also very active in financing seniors healthcare deals. Recently, new lending capacity guidelines were issued by the federal government, ensuring that both agencies have abundant capital to lend in the space.
“Seniors housing also aligns with the agencies’ mission-driven lending mandate,” says Matt Ruark, SVP and head of commercial & healthcare mortgage production.
While the outlook in seniors housing remains positive, investors are wary of a number of challenges. These include a tight labor market, the rising costs of hiring and retaining skilled healthcare workers, a spike in construction expenses, and the likelihood of an impending economic downturn. “Seniors housing is recession resilient,” notes Beth Mace, NIC chief economist. “It is not recession proof.”
These headwinds, however, should not deter investors. According to research presented by NIC, more than 14 million middle-income seniors, age 75 or older, will be in the marketplace by 2029. More than half of these middle-income Americans are not expected to be able to afford housing, including independent living, assisted living, memory care, skilled nursing and post-acute care facilities.
Experts agree that new models must emerge, where the care and services needed by middle-income seniors will be delivered cost-effectively and with new financial structures to fund them.
For questions, comments or concerns, please contact Jennifer Duell Popovec