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M&A Activity Expected to Continue in Seniors Housing, Skilled Nursing Spaces, Survey

September 28, 2017, 07:35 AM
Filed Under: Healthcare

A Capital One survey revealed that seniors housing and long-term care executives have an optimistic outlook for M&A activity heading into the fourth quarter of 2017. Eighty-nine percent of executives predict that the pace of M&A in the sector will maintain or exceed the current pace over the next year, with about half of that number (43 percent overall) anticipating an increase in activity.

Additionally, Capital One’s survey of more than 150 industry professionals also provided insight on the challenges that are top of mind for the industry. Labor costs and supply and demand imbalances were named by 33 and 32 percent of respondents, respectively, as the chief concerns for the year ahead. Further fueling the sentiment that M&A activity will be a focal point for the industry, just four percent cited availability or cost of capital as their top financial challenge.

“The uptick in acquisition interest is a positive sign for the industry,” said Chris Taylor, Managing Director at Capital One Healthcare. “It could be a reflection of some of the concerns we’ve seen over the past year about a potential unevenness in the supply and demand for newly developed seniors housing properties in some sub-markets.”

The acquisition of existing facilities was cited by 37 percent of respondents as the strategy that would present the greatest amount of opportunity in the year ahead. Another 30 percent cited repositioning of older properties as their chief focus. Just 19 percent of executives currently view new development as the best opportunity.

“The seniors housing market continues to be active,” said Jim Seymour, Senior Managing Director, Capital One Healthcare. “Our team is well prepared with a wide variety of financial solutions to help clients navigate this dynamic environment.”

The focus on M&A brings with it the expectation that real estate term loans will drive financing. Thirty percent of executives named this as the most important form of financing for their organizations in the year ahead. Highlighting the current industry emphasis on revitalizing existing properties, nearly a quarter (22 percent) of respondents selected refinancings as their principal financing need for the year ahead. An equal number cited construction loans.

Geographically, executives expressed particular interest in the Southeastern and West Coast markets, with 26 and 22 percent, respectively, citing these areas as those that offer the most opportunity in the year ahead.

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