Browse Tag: senior living

Independent Living Facilities: How They Fit Into The Boom

I was reviewing the various names our industry has used to describe the senior living property sector when I noticed that one appears to be picking up steam: independent living facilities.

The definition of independent living refers to more than facility type — it means a perspective on care that does encompass elderly care without stopping there.

The Shifting Definitions

About independent living, Wikipedia says:

As seen by its advocates, is a philosophy, a way of looking at disability and society, and a worldwide movement of people with disabilities working for self-determinationself-respect and equal opportunities. In the context of eldercare, independent living is seen as a step in the continuum of care, with assisted living being the next step.

The term has different applications as well.  In the very useful glossary at SeniorHousingNet.Com, independent living is characterized two ways — first as “Multi-unit senior housing development that may provide supportive services such as meals, housekeeping, social activities, and transportation (Congregate Housing, Supportive Housing, Retirement Community). Independent Living typically encourages socialization by provision of meals in a central dining area and scheduled social programs.”

Yet within the very same definition, we find that independent living can also be used to “describe housing with few or no services (Senior Apartment)”

With a spread of definitions that broad, the appropriate terminology needs a much closer look before a pro forma is drafted for prospective investors.   And as with so many other commercial real estate specialties, state regulation looms very large in making these definitions stick (or not).

ALFA and state regulation

The Assisted Living Facility Association (ALFA) is very active in all the areas one might expect a national trade association to be, including providing regulatory resources that spell out guidelines, licensing terms and answers on a state by state basis.

ALFA’s state regulation and licensing resources can be found here.

Improved residential markets means getting rent payments cash out of home equity is getting easier 

According to Marcus & Millichap’s latest report on the sector one thing driving a great deal of growth in independent living facilities is the access to equity in their homes by seniors. A rejuvenated residential market has re-opened the pathways to obtaining the rents late in life that drive the independent living market sector.  As Paul Bubny at GlobeSt says:

[…], the pipeline is filling up for independent living facilities, with MMI predicting that new construction will add 2.4% to the existing stock. Thanks to an improving residential market enabling seniors to unlock equity in their homes, MMI says IL occupancy is expected to rise 50 bps to 92.3% by year’s end, while average rents advance 3.1% to $2,923 per month.

Three REITs Starting 2015 With Strong Health Care Acquistions

REITs aren’t just a channel for equity-style investment in commercial real estate, they’re a kind of barometer to use to keep an eye on trends in specific sectors. When REITs go on a buying spree, it pays the trend-watcher to pick out what’s being acquired as well as the price tags. This way questions can be answered about where capital is meeting property – is it in tertiary or secondary markets?  Is medical office looking better to portfolio managers than is assisted living? Presented are some of January’s biggest REIT acquisitions in the health care sector.

1.  Griffin Capital’s Griffin-American Healthcare REIT III picked up more than $340 million in health care property in January.  The 19 acquisitions broke down into 17 medical office buildings, one acute care hospital, and one senior housing facility.

“These latest acquisitions represent high-quality assets leased by very strong tenants and operators with whom we look forward to sharing mutually rewarding business partnerships,” said Danny Prosky, president, chief operating officer and one of the largest stockholders of the REIT. “They also add tremendous diversification to our rapidly growing portfolio.” 

Notably, the REIT has announced that it has executed letters of intent and/or purchase and sale agreements to acquire 31 additional healthcare properties for an aggregate purchase price of approximately $530 million. These pending acquisitions are subject to customary closing conditions and the satisfaction of other requirements as detailed in the agreements.

2. Leading the three in dollar amount, Ventas completed a whopping $2.6 billion merger with American Realty Capital Healthcare Trust that netted 143 health care properties. This breakdown was more diverse than Griffin’s, as medical office buildings added up to half of the portfolio. The other half was more or less evenly taken up by assisted living, hospitals and senior housing.  The full breakdown: 78 medical office buildings, 29 seniors housing operating communities, 13 seniors housing triple-net properties, 14 skilled nursing facilities, 7 hospitals, and 2 land parcels.  For a look at where these properties are, click on Ventas’s map below.  Read about the merger in full at this PDF.

ventas-acquires-arc

3. Health Care REIT acquired a portfolio of Massachusetts, New Hampshire and Connecticut assisted living facilities for $360 million. The deal was completed in January and represented a profitable turnaround for the seller, Intercontinental Real Estate of Boston. The Boston Globe reports Intercontinental purchased the portfolio in 2005 for about $152 million and later put in about $20 million in renovations. The poftiolio consists of nine senior living facilities.