Sell or refinance...that is the question

Many of our clients are experiencing loans that are maturing. Rather than focus only on refinancing, doesn't it make sense to explore selling? Even though lenders are getting back in the market and making loans, they are requiring significant equity. Our clients are often faced with having to come up with additional cash/equity in order to refinance. Gone are the days of pulling out cash/equity when you refinance in the current environment.

Thankfully Senior Living is off to a great start in 2010. Based on the number of transactions we are closing, we see acquisition lending improving across the board. Buyers that have been on the sidelines for the last two years are looking for opportunities to grow their portfolio.

So, please give me the opportunity to put together a confidential market analysis of what your property is worth before you automatically refinance your facility. Please Email me at saul@seniorlivingbrokerage.com for more information.

What Are You Seeing in the Market?

In the Senior Housing and Long-Term Care industry there has been a common belief that the slowing of the overall economy and restricted availability of capital that began in mid-2007 would cause a massive influx of properties coming onto the market as a result. So, where are they?

The common question right now is, “Where is all the deal flow?” Most buyers and operators felt there would be a large amount of sellers forced into the marketplace due to the inability to refinance properties, over leveraged properties, or facilities struggling with operations/occupancy.

The Numbers:

Let’s take a look at the number of transactions as well as related dollar volume for the past couple of years.

I think it makes sense to mention that for both 2006 and 2007, the five largest deals were all over $1B and accounted for approximately 60% of the dollar volume in the industry. Removing all transactions over $1B from the statistics, the remaining statistics dollar volume statistics look more like this:

Since 2006, the number of transactions is down (by 38.3%). However, from 2008 to 2009, the number of transactions is only down by (6.25%). The data also indicates that during the past three years, the number of “large” deals is has dwindled with the deteriorating credit markets. Take heed, when compared to other assets classes, we seem to be fairing relatively well despite the current credit markets.

As you can see in the following table, the year over year commercial real estate transaction volume from 2008 to 2009 was down, from 56% to 65%, depending on the property type.

The good news is that the dollar amount produced in 2009 happens to be approximately what the dollar volume was in 2003, the last time the acquisition market was struggling to get out of a recession. One noteworthy difference is that the industry fundamentals are much better today than they were in the 2002/2003 period. So what does this mean if you are an owner with a property you are contemplating selling in today’s market? After all, what is behind us is behind us.

Here is what we can tell you. Although the credit markets are more challenging than they were two years ago, we are completing transactions at aggressive prices. Our biggest hurdle is keeping an inventory of facilities to sell. While cap rates have ticked up somewhat for assisted and independent living properties, they are still at historically aggressive levels. The demand for nursing homes and assisted & independent living properties is through the roof due to the lack of supply in the market. Each time we list a property we continue to be amazed at the level of interest we are able to generate, simply because there are so few properties available. This, combined with a pent up demand from investors eager to grow their portfolios creates strong demand and pricing.

The result is multiple, qualified offers for each building we market. 2009 was Senior Living Investment Brokerage’s best year as far as number of properties sold and 2010 is shaping up to compete with or surpass our 2009 totals.

I would be happy to prepare a confidential analysis for any properties you may consider divesting. Contact Michael Brundage at brundage@seniorlivingbrokerage.com for more information.

Jeff Baxter Joins Senior Living Investment Brokerage

Jeff Baxter has joined Senior Living Investment Brokerage as a Senior Associate. Jeff will focus on seniors housing sales in the Southwest. Prior to joining Senior Living, Jeff began his career working in Private Client Services for UBS Financial Services Inc. Since 2005 he has served his alma mater, Wheaton College (IL) as Director of Principal Gifts, structuring numerous capital and endowment gifts of $1 million+ as part of their most recent $260 million campaign. Jeff earned his BS in Business and Economics from Wheaton College in Wheaton, IL. Jeff can be reached at 630/858-2501 or baxter@seniorlivingbrokerage.com

Matthew Alley and Jeff Binder Announce Washington Sale

On April 30th, 2010, Jeff Binder and Matthew Alley brokered a 115 unit Assisted Living, Independent Living and Memory Care facility for $16,250,000. The property was sold out of receivership through the Washington State Bankruptcy Court. The facility was purchased by a large national owner/operator out of the Pacific Northwest. This transaction was a court appointed sale and Senior Living Investment Brokerage contacted over 60 potential Buyers and multiple offers were received. For additional information, please contact Jeff or Matt.

Best time of year to sell?

I have been asked numerous times over the last few months if there is a better time of year to put a property on the market. Brokers of residential real estate will highlight why Spring is a good time to go to market. However, there is no better time of year to go to market with a long-term care or Seniors Housing property. This property type is stable, provides a level care and driven by investment supply/demand. A Seller should look at a calendar and expect slow response times around holidays and peak vacation times. Don't wait for a certain time of year. Contact me to find out what your property is worth and develop the best marketing strategy for your facility.