Merger and acquisition activity in senior living and care dropped to 115 publicly announced deals in the third quarter compared with 120 known transactions in the second quarter, according to information from Irving Levin Associates.
Year over year, third-quarter transactions declined 18% from the 140 deals in the same quarter of 2022. Last year was particularly busy for senior living and care, where the number of publicly announced acquisitions rose to 527 from 2021’s 450.
The 115 transactions recorded in the third quarter of this year represent the second-lowest quarterly deal total since the third quarter of 2021, when 111 deals were publicly announced. Deals have been heavily affected by high interest rates in the marketplace, according to Levin.
The $700 million spent on third-quarter 2023 transactions fell by 46% from the $1.29 billion spent on second-quarter 2023 transactions and by 82% from the $3.87 billion spent in the third quarter of 2022, based on disclosed prices. There has not been a lower quarterly spend recorded in the past 10 years, according to Levin.
“With communities selling for lower values because of the high capital costs and quiet bidding environments, many sellers are sitting on the side lines, if they are financially able to,” Ben Swett of Levin Associates said in a press release. “Buyers have been less willing or able to make large purchases due to the difficult capital markets, as well.”
The deals that took place in the third quarter more often than not involved smaller portfolios. The average transaction size, measured by properties per deal, steadily has fallen. In the third quarter, just nine portfolio deals involved more than five properties each. That’s compared with 17 such deals in the same quarter a year ago.
“COVID-19 has many lingering effects in the senior care industry, inflation is elevated, staffing is scarce and expensive, interest rates are historically high and pricing out buyers, cap rates have risen to effectively halt many low-cap rate active adult sales, and values are low enough to keep many potential sellers from selling,” Swett said. “This is all to say, for transaction volume in 2023 to virtually equal that of 2019 is surprising, to say the least.”
