In 2024, the Seniors Housing & Healthcare sector has been marked by a record number of announced transactions. According to The SeniorCare Investor, this year could surpass the all-time high set in 2022 of 520 announced deals.
A notable trend this year is buyers seeking properties priced “below replacement cost.” Most completed deals have been value-add, opportunistic, and below-replacement cost, with some significantly below. However, replacement value varies significantly between regions like the Midwest versus the Coasts. With limited new development nationwide, determining this threshold is challenging.
Investors remain focused on yields, but questions arise when the per unit value exceeds replacement cost. Are values being capped at a buyer-determined price per door that feels “comfortable?” The answer is complex and evolving. Recently, there has been a growing trend of newer, stabilized, or near-stabilized properties entering the market and attracting significant buyer interest.
Historically, seniors housing investors were less sensitive to price per unit, focusing instead on cash flow and appropriate risk returns. In recent years, margins have compressed, occupancies have dipped, interest rates have risen, and many investors have retreated from the market, waiting to see what would happen. Contrarian investors with available cash remained bullish, capitalizing on market dislocation by acquiring assets at significant discounts.
Market trends indicate a shift, with increased interest in stabilized properties and a continued focus on value-add opportunities. As the sector adapts to these changes, investors are navigating a complex landscape where traditional metrics and emerging trends intersect.
– Cody Tremper, Managing Director Seniors Housing & Healthcare
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