Today’s private-pay senior-housing properties — which include independent- living, assisted-living and memory-care facilities — are a far cry from the first modern-day units built in the 1980s, which had a hospital-like feel. Private-pay facilities rely on out-of-pocket payments, rather than government-subsidized
funds. Present-day senior housing increasingly resembles upscale residential living, with
a hospitality twist, and is appealing to a broad audience.
Given the fractured borrower base within this sector, there will be attractive opportunities
for mortgage brokers to mediate. It’s critical for brokers to understand the borrower base,
market size and desirable property characteristics, as well as the types and availability
of financing for senior housing.
A fragmented market
Ownership of private-pay senior-housing stock is fractured, with the top 50 owners holding
less than 40 percent of the market, according to a 2017 report from the American Seniors
Housing Association. Because there is a smaller lender universe in this sector, brokers have
a greater opportunity to introduce a client to a lender they didn’t already know.
Owners of smaller properties without deep banking relationships typically rely on
mortgage brokers to source financing opportunities. Institutional owners, whose banking
relationships may or may not finance senior housing, also value a broker’s ability to
optimize their financing.
Senior housing remains an attractive and growing investment sector for owners
and lenders. According to the National Council of Real Estate Investment Fiduciaries’
first-quarter 2017 property index, senior-housing returns — composed of capital and
income returns — have exceeded those of almost every other major real estate property type by 2 to 5 percentage points or more over periods of one, three, five and 10 years.
Sales-transaction activities have been robust, but dollar volumes for senior-
housing and nursing-care facilities totaled $14.4 billion in 2016, a 34 percent
year-over-year decrease. Interestingly, the total of 513 closed deals in 2016
was only 9 percent less than the record number of 563 in 2015, meaning
the average dollar amount of a deal declined from $38.7 million to
$27.5 million, the National Investment Center for Senior Housing
& Care reported. Government-sponsored enterprises Fannie Mae and
Freddie Mac — two of the largest senior-housing lenders — provided
$4.7 billion in financing in 2016, up more than 250 percent from 2012.
Senior housing is poised for significant growth over the next 10 to 15
years, as the baby boomer generation, numbering 74 million in the U.S. in
2016, starts choosing or needing the lifestyles and services that senior housing
offers. About 70 percent of people ages 65 or older will ultimately need some form of
long-term care, although the average senior-housing resident is in their low- to mid-80s.
By 2030, the number of people age 85 or older is expected to reach 8. 9 million, a 34 percent
increase from 2012.
Meeting modern demands
The notion that all senior-housing-properties are dark and musty with low ceilings could
not be further from the truth. Baby-boomer residents of tomorrow, who are largely
the decisionmakers for today’s older, silent generation, have tastes that favor more
common-area space, larger and more open floor plans, and more natural light.
Residents also require modern amenities that promote their independence and are
more in line with luxury resorts, such as cafes, bistros and fitness centers. Some prop-
erties even have rooftop bars, putting greens and game rooms. Property owners have
taken notice and adapted, without sacrificing the quality of care that residents receive.
“We strive to create highly amenitized real estate, but do so in a building that, while
it feels luxurious, is designed to provide the level of care that the residents and their
families expect and deserve,” said Dan Gorham, a partner at Fountain Square Properties,
LLC. Gorham also highlighted the importance of choice — from meals and activities to
care and unit options — for empowering residents and their families to make the best
personal living decisions.
Owners also are using technology to gain a competitive edge by appealing to the safety
and peace of mind that residents and their families desire. In-room, motion-sensor tech-
nology can track a resident’s movements and alert staff to serious medical concerns.
Other technologies enable operators to verify who is entering a resident’s room and
how often medical staff is checking on them.
Continued on Page 34 >>
<< Seniors continued from Page 31
Scotsman Guide Commercial Edition |
ScotsmanGuide.com | March 2018 32