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.

Senior Living Announces Chicago SNF Sale

Ryan Saul and Michael Brundage sold a 313 Bed Skilled Nursing Facility in Chicago. Senior Living was able to procure 10 offers on the facility. In addition, the transaction took 82 days from listing engagement to closing. The Seller was a regional owner/operator and the Buyer, located on the East Coast, was seeking an opportunity to expand into the Midwest. The price per bed was over $71,000 even though the facility had negative cash flow. The 72,432 square foot building on 1.15 acres had a census of 64%. The facility enjoys an excellent reputation and a great location.

Why Hire An Exclusive Broker?

If you are anything like me, you would not consider selling your home without the assistance of a trustworthy real estate professional. In our line of business, however, we often encounter owners of Nursing Homes and/or Assisted Living facilities who are reluctant to engage a professional to effectively market their properties. It is surprising that while most people willingly engage an agent in the sale of their home in order to obtain top dollar for their valued asset, others attempt to sell a multi-million dollar business on their own, running the risk of leaving a significant amount of money on the table.

The exclusive representation provided by Senior Living Investment Brokerage (“Senior Living”) creates a value for property owners that far outweighs the fees associated with entering into such an arrangement.

An exclusive representation agreement with Senior Living consists of two basic principles:

1) The owner agrees to sell the property and to list it only with Senior Living.

2) Senior Living commits its full expertise, experience, and resources to aggressively and confidentially market the property and to loyally represent the owner throughout the entire transaction.

Why Engage Senior Living With An Exclusive Agreement To Sell Your Senior Housing/Long-Term Care Community?

1) Confidentiality. When working with multiple brokers, they may not understand the importance of controlling to whom the information is sent and the intricate nature of facilitating confidentiality throughout the marketing process. We only contact potential buyers directly via an initial telephone conversation. Only upon receipt of an executed Confidentiality Agreement is any specific property information disclosed.

2) Higher price. Professional representation by Senior Living, a specialized company, exposes the property to a much larger market of buyers, thus increasing the price by more than the fees.

3) Sends a Message to the Market. Engaging Senior Living sends a strong message to the marketplace that, not only is the owner committed to selling the property, but that the likelihood of a successful closing is better. Therefore, more investors will devote time to the offering and ultimately bid higher on the property.

4) Establishes Pricing Expectations. This saves the owner time, effort and energy in that he or she will not have to fulfill numerous requests for information only to learn that the prospective purchaser’s price expectations are not in line with the current value of the property.

5) It Saves the Owner Time. In addition to promoting the property, Senior Living will minimize the owner’s time involvement by screening and presenting offers, fulfilling information requests, assisting in arranging financing, coordinating inspections and reviewing escrow documents.

Selling a Long-Term Care facility requires professional representation and Senior Living will achieve the highest price for your property. Our commitment to selling only Long-Term Care & Senior Housing and track record of success demonstrate this.

Feel free to contact me with questions at Michael Brundage.

By Michael L. Brundage,
Senior Vice President