Forbes: REIT Investment Is Viagra for Senior Housing
The commercial real estate world - and even the business press at large - can get pretty excited when a major office building like the Sears (now Willis) Tower in Chicago or fancy Four Seasons hotel changes hands. No one, though, gets too worked up about assisted-living properties or other facilities designed, built and managed to house the nation's senior citizens. But REIT M&A activity in the suddenly hot senior housing market has made that sector the most active of any property type for commercial property investors. According to a research note published by Real Capital Analytics. Data from the New York independent research firm - which tracks commercial property sales globally (and where I serve as Editorial Director) show $22.6 billion in closed and in-contract deals in senior housing so far this year. Real Capital has just formed a data collaboration with the National Investment Center for the Seniors Housing & Care Industry aimed at improving the quality of transaction information in the rapidly growing sector.
The biggest merger in the sector has yet to close. Ventas (NYSE:VTR) is acquiring REIT Nationwide Health Properties (NYSE:NHP) for $7.4 billion. Among the other large deals in 2011: Ventas has also acquired the real estate from private owner-manager Atria Assisted Living for $3.1 billion; REIT HCP (NYSE:HCP) is doing a $6.1 billion sale-leaseback of more than 300 properties from Carlyle's HCR Manorcare group; and Health Care REIT (NYSE:HCN) bought Genesis Healthcare from JER Partners for $2.4 billion in another sale-leaseback transaction. All together, REITs are responsible for 94% of all deals in senior housing, and this sector - largely seen as a niche - has actually drawn more investment this year than any other property type, including the big-ticket office property market.
Will this merger mania continue? Maybe not at this pace - at least for now. But the sellers in these deals have all spent years aggregating smaller companies in the industry, and yet fragmentation still rules the day in a property type where the barriers to entry are relatively low for small, local and private investors. In other words, watch this space.
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