fbpx
ASSET SPOTLIGHT

Let’s Talk Assisted Living Investments

Terrydale Capital

18 November, 2021 · 5 min read

As American baby boomers age into retirement, senior living housing inventory should see a projected increase. This is mainly since the aging population is faced with the challenge of finding suitable accommodation as they progress in age.

Notably, senior living communities were virtually unheard of before the 19th century. However, coming into the late ’90s, there was a greater outcry for choice, dignity, and independence as it pertains to assisted living for the aging population.

For the past two decades, the sector has rapidly expanded as access to capital market funding became more formidable. The demand for these facilities is driven by the present-day senior who is more empowered, committed to staying active, and selective as it pertains to the lifestyle that best suits them.

Why Invest in Senior Living Investment Assets

It is estimated that by 2035, the U.S will be home to over 78 million citizens above the age of 65 years. What’s more, the percentage of those above the age of 85 is set to grow at an even steeper rate.

This surge in demand provides an attractive investment opportunity to invest in both independent living and Continuing Care Retirement Communities (CCRCs).

You wouldn’t be a savvy investor if you did not consider the historical investment performance for the asset class. For starters, it has proven to be recession resilient. What’s more, it has growing demand drivers, which has created a supply-demand imbalance.

Overall, the investor sentiment is that senior living assets are on a bullish trend. What this means is that you will be joining other investors already yearning to buy more within this category.

Granted, the operating costs are significantly strong. Still, investor appetite in senior housing assets remains high, which should act as an additional incentive.

Overall, you want to invest in senior living assets due to the sheer number of seniors in the market for housing facilities that cater to their specific requirements. What’s more, more of these seniors are looking to live within communities that either consist entirely of other baby boomers like themselves or those with amenities they believe will make their prime years significantly comfortable.

Pros of Investing in Senior Living Assets

The current outlook is that the senior housing market will most likely to move from being simply a niche market to a significant specialized market. Despite the senior housing asset class being a relatively young industry, there are significant pros to putting your money into the industry.

Financing

The mid -1990s were rife with Real Estate Investment Trusts (REITs). Additionally, this period saw the emergence of private commercial mortgage-backed securities (CMBS). These saw access to capital available to developers. The result was that these developers ended up building properties at a rate that exceeded the demand.

At the beginning of the decade, stock prices took a dip which would see a limited supply of new equity financing. Still, the valuations for acquisition targets remained competitive, which would prompt the surge of mergers and acquisitions (M&A).

The industry has slowly evolved from the low occupancy rates and inability to meet investor expectations. Specifically, we are seeing an influx in occupancy and improved operating margins. The industry has shown healthy year-over-year revenue and NOI growth, which is attractive to financiers.

Lenders have started to open up more competitive financing options on independent living units that typically resemble traditional apartment units. The increased competitive lending options has created stronger and stronger valuations as margins continue to improve. Terrydale Capital has continued to increase their focus on lenders that have a appetite for these opportunities. Funding is now available through agency, CMBS, bank, and LifeCo. lenders.

Cons of Investing in Senior Living Assets

Business Risk

The industry is relatively young, which translates to a short track record, especially as it pertains to assessing investment risk. This presents the investment opportunity as being relatively volatile.

During the COVID-19 pandemic, this was particularly concerning for lenders. At this time, it was also apparent that the industry had a long way to go as it pertains to aligning said properties with epidemiologists. Altogether, it was apparent that there is more to be done to transition the niche market into a more mainstream asset class.

Affordability

While the case for investment is particularly compelling, you need to consider the fundamentals of affordability. Specifically, the ability of the seniors to spend on the senior living facilities depends on the income they get from the pensions and investments. As an investor, you must toe the line as it pertains to providing competitive amenities while keeping the prices low enough to attract your target market.

A significant setback in investing in senior living assets is the unpredictable supply chain. The latter has created an ecosystem that moves at a significantly slower pace.

Senior living asset classes have favorable demographic fundamentals and provide the opportunity for higher yields than the conventional apartment. As you consider investing in senior housing assets, you want to partner with the right operator. This is particularly since while there are favorable financing options, there still is a restrained supply pipeline. Still, you can be assured of solid revenue growth and higher profit margins.

As an investor, note that at present, senior living assets have increased investor interest and improved operations. What’s more, the cap rates have fallen to single digits. Finally, you want to get on this bandwagon as the senior housing market is driven solely by the surging aging population and is not subject to external economic factors.

When you are ready for the most competitive financing structure in the market for your senior living property, we invite you to get in contact with Terrydale Capital. We are committed to bringing you both accurate and up-to-date capital market knowledge that should help you along with senior living asset financing.

As we have hundreds of deals passing by our desk every day, you can be sure that we will promptly bring to your attention the best deals. We go beyond just providing you with financing options. Our consultants are dedicated to building a lasting relationship with you to ensure you end up getting the best returns on your investment.

Do not risk pushing bad deals or your money. If you want confidence in your next senior living asset investment, contact us today and let our knowledgeable and professional team take every step with you.

Want to receive Weekly Market Updates, Deal Spotlights, Off-Market Opportunities, and Referral Rewards such as an iPad, Bose Headphones, Peloton, or a $2,500 Appraisal Fee Waiver? Click Below

More Deals and Updates

$1M Multi-Family Acquisition in Irving, Texas

$1M Multi-Family Acquisition in Irving, Texas

DEAL SPOTLIGHT $1M Multi-Family Acquisition in Irving, Texas22 September 2022 · 3 min readToday’s Deal Spotlight takes us to Irving, Texas, and centers on the $996,000 acquisition of a multi-family property. As the deal progressed, additional paperwork became...

$2.3 M Multi-Family Acquisition | San Antonio, Texas

$2.3 M Multi-Family Acquisition | San Antonio, Texas

DEAL SPOTLIGHT $2.3M Multi-Family Acquisition in San Antonio, Texas 14 September 2022 · 3 min readToday’s Deal Spotlight takes us to San Antonio, Texas, and centers on the $2.31 million acquisition of multi-family property. Our client was clear on what they wanted...

$5.6M Multi-Family Acquisition | Waco, Texas

$5.6M Multi-Family Acquisition | Waco, Texas

DEAL SPOTLIGHT $5.6M Multi-Family Acquisition in Waco, Texas 15 September 2022 · 2 min readToday’s Deal Spotlight centers on the $5.6 million acquisition of a multi-family commercial asset in Waco, Texas. What We Were Up Against Our client was on a strict timeline,...

Understanding CMBS Loans

Understanding CMBS Loans

Learn Understanding CMBS LoansSeptember 15th, 2022 · 5 min readWith so many loan types available, it’s important for commercial real estate investors to understand their financing options. A commercial mortgage-backed securities (CMBS) loan represents an attractive...

$5M Self-Storage Refinance in Lexington, NC

$5M Self-Storage Refinance in Lexington, NC

DEAL SPOTLIGHT $5M Self-Storage Refinance in Lexington, North Carolina8 September 2022 · 3 min readToday’s Deal Spotlight takes us to Lexington, North Carolina, and centers on the $5 million refinance of a self-storage real estate asset. Closing a deal on a facility...

What Is Triple Net Leasing?

What Is Triple Net Leasing?

Learn What Is Triple Net Leasing and How Can It Help My Investment Strategy?September 1st, 2022 · 7 min readCommercial real estate investors have many options to choose from when it comes to leasing agreements. Triple net lease (or “triple-net” or “NNN”) properties...

State of the Market | August 2022

State of the Market | August 2022

Market Updates Commercial Real Estate Market Update | August 2022August 25th, 2022 · 4 min readTerrydale Capital is actively providing capital solutions to our clients. We are constantly in discussion with our capital market resources and identifying new resources...

Multi-Tenant Retail Acquisition | McKinney, Texas

Multi-Tenant Retail Acquisition | McKinney, Texas

DEAL SPOTLIGHT $2.9M Multi-Tenant Acquisition | McKinney, Texas18 August 2022 · 4 min read This week's deal spotlight focuses on an acquisition loan for a multi-tenant retail asset in the amount of $2.9 million. Located in McKinney, TX, this property was purchased...