As the economy slowly rises from the pandemic, the “inflationary environment” and “pent-up transactional demand over the past 18 months or so,” real estate investment trusts are dealing in common themes behind a record-breaking year of merger and acquisition transactions, according to Ted Flagg, senior managing director and healthcare leader at JLL.
“There is going to be enormous cash flow growth in seniors housing. The question really is, when is that going to happen,” Flagg told the McKnight’s Business Daily. “I think there’s no question across the industry that we’ll certainly have double-digit net operating income growth. It’s just a matter of timing of that.”
“Net lease portfolio owners are under pressure because of historically high inflation… .If you’re in the net lease business, all of a sudden you need to scale up in order to have the right cost capital in terms of access to debt market and equity and so forth,” he said.
2021 has been a record year for real estate investment trust mergers and acquisitions overall, according to the recently released M&A and Strategic Transactions Monitor report from JLL, which Flagg co-authored with others in JLL’s Capital Markets M&A and Corporate Advisory Group. The real estate investment trust industry hit $108 billion in transaction volume as of Sept. 30, outperforming strong expectations and driven both by strategic and private capital. Flagg said that senior housing accounts for about $4 billion to $5 billion of that amount.
“REIT M&A volume has broken a 15-year record that was set back in 2006,” Steve Hentschel, nead of the M&A and Corporate Advisory Group with JLL Capital Markets, stated in a press release. “All major sectors contributed to the record, which implies a very favorable deal making environment for our sector. Confidence has returned, most REITs have strong currencies to use in strategic mergers, debt is historically cheap and debt markets are liquid.”
