September 16, 2025 – 60 Seconds with Swett: Getting Realistic with New Development
The NIC Fall Conference buzzed with optimism for record Q4 M&A, fueled by LevinPro’s updated valuation tool. Yet talk of middle-market senior housing remains stalled by high build costs and limited returns, leaving many to expect government aid or active adult models as the only viable path forward.
Transcript
The positive mood at the NIC Fall Conference was contagious, as dealmakers were looking forward to a potential record-breaking fourth quarter. We at LevinPro are also gearing up to cover a new elevated level of M&A activity and pricing in the coming months, with our updated valuation tool better accounting for today’s market and the estimated prices for higher-quality, better-performing properties.
But one disappointment from the conference may have been the conversation surrounding new development, particularly building for the middle market. We don’t fault anyone for being constrained by the simple math of the cost to build and the rents needed to cover those costs. If anything, the industry may need some irrational capital to come in and build, leaning on the demographics thesis to bring them ultimate success.
But we are growing tired of all the talk around the need to build for future demand or the need to open communities that are affordable to middle-income seniors. We’ve heard that for many years, and it is still mostly talk. Construction and capital costs will surely come down eventually, but most of the development dollars will go to high-end communities that can generate higher returns, increasingly making seniors housing a luxury product. In more of our conversations at NIC, there was a growing resignation that the main solution for the middle market will be a government solution, like expanded Medicaid waiver programs for assisted living or some other form of subsidies. But the word “Medicaid” scares some people away. Or active adult communities eventually bringing in AL-like services, which would change the character of the active adult community. But expectations and returns will have to be lowered for the middle-market solutions, and we are not sure people are ready for that.
Heading Down to Austin
We’re heading to Austin for the NIC Fall Conference, where optimism is high amid strong M&A activity, improving capital markets, and hopes for a rate cut. With steady operating gains and rising property values, more sellers may enter the market, fueling higher prices and potential record per-unit values.
An Update to Our Valuation Statistics
Deal activity in 2025 shows value-add dominance, some Class-A sales, steady liquidity, and slightly lower cap rates, boosting values. Watch our Aug 28 webinar, A Mid-Year Valuation Stats Update, for fresh LevinPro LTC data and expert insights on market trends, buyers, and M&A strategies into 2026.
60 Seconds with Swett: SNFs Get a Boost from CMS
CMS finalized a 3.2% SNF PPS rate hike for FY2026, raising payments by $1.16B—less than last year but above initial proposals. States are also adjusting Medicaid rates to better reflect SNF realities. Support remains strong post-pandemic, but uncertainty lingers as policy shifts could still impact margins.
