More than 10 months into the COVID-19 pandemic, senior housing investors are more interested in prioritizing acquisitions above new developments as the uncertainty of the market continues. That’s according to panelists at a senior housing valuation outlook webinar last week.
Panelist Adam Heavenrich of Heavenrich & Co. also pointed to an increase in highly motivated sellers seeking to unload existing properties at a lower price than the cost of building a new community.
“The pandemic created a lot of stresses to the system, both financial and operational with staffing pressures,” Heavenrich said. “There was a higher motivation for sellers to come to the table. We’ve gotten more comfortable with pricing, as the owner-operators and banks alike are ready to sell.”
Bill Pettit of R.D. Merrill Co. agreed, noting that the pressure and stress on operators as a result of record-setting occupancy drops has shifted costs per unit in favor of acquisitions.
“We’re starting to see valuations that are well below what we can develop for,” Pettit said. “If it’s the right business model and the right locations, we’ll be much more active on the acquisitions side than putting capital into development at this point.”
Their perspective aligns with data released last month showing that the number of publicly announced senior housing and care acquisitions in the fourth quarter of last year rose to a record high and represented a 107% jump from the previous quarter.
