Seniors Housing Weekly Update - Another Strong Year for M&A?

January 7, 2014

 
January 7, 2014. 60 Seconds with Steve Monroe. In the fourth year of a bull seniors housing market, let's hope new buyers don't ruin the party.

Another Strong Year for M&A?

Well, we survived 2013, but in 2014 we will have to live through another election year, and my guess is that it will be as nasty as the rest of them, if not worse. What will not be nasty this year, however, is the M&A market. With Janet Yellen taking over the reins at the Fed, we will not see a major departure from Ben Bernanke’s policies, at least not before the mid-term elections. But even if interest rates increase above what is now a two-year high, the impact will be minimal because there are so many buyers with very different capital structures, not to mention some buyers from other real estate sectors who view 6% cap rates as a bargain. That is, until they have their first flu season, or multi-million dollar lawsuit, or staffing problems. Then they will learn why seniors housing cap rates are higher than their other asset classes. Yes, it is a great business, and it has been a relatively stable business throughout the past economic downturn. The key word, however, is “business,” and that business risk does not go away. We’ve had a great run, so let’s not screw it up.

 

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