SPECIAL REPORT | Post-Election Outlook

2020 Election Results Together with New Stimulus and Vaccine Distribution Bolster Real Estate Investment Outlook

  • Tax reform outlook and other notable legislation
  • Role of new stimulus and vaccine rollout on 2021 economic outlook
  • Key stimulus provisions for real estate investors

Read the complete report HERE

M&M Special Seniors Housing Report, Winter 2020

The newest research report from Marcus & Millichap includes

  • How shifting dynamics have adjusted lending activity
  • Coronavirus’ impact on asset valuations
  • Current LTV ratios and rates offered by lenders

Read the complete report here

4 Ways COVID-19 Could Permanently Affect Senior Housing

By Chuck Sudo | September 24, 2020 | Senior Housing News

Covid-19 is giving health systems a better appreciation for senior living’s position as a part of the health care continuum, and for the fact that operators can provide social determinants of health to keep overall costs down for hospitals and acute care settings.

Providers are also forging bonds with local public health departments they overlooked in the past, which will prove beneficial for communications and transparency, after the pandemic subsides.

But questions remain unanswered regarding if Covid-19 will make it easier to recruit new talent to the industry, and whether enhanced benefits are establishing a new wage floor for labor that will contribute to permanent expense increases.

This is according to executives from Bickford Senior Living, Commonwealth Senior Living, Country Meadows Retirement Communities and Silverado, who shared their long-term forecasts during the 2020 Argentum Senior Living Virtual Conference.

While it’s impossible to predict with certainty how Covid-19 will permanently alter senior living operations, the panelists offered several ideas, with particular focus on infection control, health system partnerships, transparency and communications, and staffing.

Stronger infection control

The virus has already resulted in lasting changes to operations such as enhanced safety protocols and infectious disease controls.

Residents, staff and their families should expect enhanced screening protocols to be a permanent part of entering communities moving forward, Commonwealth Senior Living President and COO Earl Parker said.

In just one example of how pandemic-related infection control practices could persist well into the future, masking could become more commonplace in senior living settings to combat different types of infectious diseases.

This is thanks to the fact that masks are proving to reduce the spread of Covid-19 in communities, and will even prove more beneficial as flu season approaches to prevent or reduce outbreaks, especially when coupled with stricter immunization and vaccination requirements, Silverado Senior Vice President, Community Operations Michelle Egerer said.

The Irvine, California-based memory care specialist mandated the use of personal protective equipment and KN95 masks, which have been approved for emergency use by the Food & Drug Administration (FDA) while the United States wrestles with a shortage of N95 masks. Doing so has helped prevent the spread of the virus between employees who test positive for the virus and are asymptomatic, and residents.

“We know, in a very significant way, that even one mask works,” she said.

Proof of value

Providers contend that the pandemic has crystallized senior living as part of the health care continuum in the eyes of health systems, Country Meadows Senior Vice President and COO Meredith Mills said.

Country Meadows was part of a unique situation in Pennsylvania, where health systems were awarded grants to help run the provider’s infection control strategy. This proved to be an opportunity for health systems to get a better understanding of the senior living space through required site visits of communities. The health systems gained exposure to the details of Country Meadows’ infection control policies and some of the procedures in its pandemic response, such as establishing Covid-19 cohorts.

The Covid-19 wings were especially noteworthy as they allowed providers operating other assisted living or personal care facilities to send Covid-19 positive residents to these cohorts to recover, bypassing hospitals and helping to maintain emergency capacity. Health systems, in turn, are also referring patients that do not need acute care — but do need some clinical oversight and support — to these cohorts.

Country Meadows’ goal has always been to provide resources to the healthcare system as a whole, serving as a bridge between home health care and acute care.

“It puts a spotlight on us as an industry,” Mills said. “Just because we don’t receive Medicare funding, how can we be a resource in the overall system?”

This look underneath the hood has also given health systems a glimpse of how exceptional senior care can reduce readmission rates to hospitals, and that senior living is well-equipped to provide social determinants for better health outcomes for seniors, which can help lower costs across the system as a whole, including benefits for acute and post-acute segments.

“[Covid-19 cast] a spotlight on all of our levels of care that demonstrates that we can take care of these individuals,” Egerer said.

This has some providers confident that better health system relationships will result from the pandemic, and others believe that Covid-19 will accelerate Medicare Advantage networks. But while these developments could indeed be a silver lining of the pandemic, the industry should be wary of the tradeoff that comes with that, Commonwealth Senior Living President and COO Earl Parker said.

He is concerned that accepting more government money will come with more government oversight, and how that is applied. Still, he is bullish on diversifying the way that people can pay for senior living.

“I see it as a big opportunity to expand our the number of residents that we can provide services,” Parker said

Forging new connections

A renewed commitment to better, more transparent communication between providers with residents and staff has the additional benefit of establishing new ties to local public health departments, Bickford Senior Living Executive Vice President of Operations Alan Fairbanks said.

Bickford relies heavily on guidance from local public health departments in its markets whenever it had a positive case in its communities, and the information it shares on outbreaks and positive cases with families is also shared with the agencies, providing a clear look into the provider’s Covid-19 response. These new relationships will prove beneficial and ensure that Bickford has priority access to a vaccine, once a viable one becomes available.

“[It’s a] partnership that was always out there that we didn’t lean on as much as we could have,” Fairbanks said.

Like the industry at large, Commonwealth increased its communication and transparency to residents and staff during the pandemic. It posts weekly updates every Friday for families and associates, detailing positive Covid-19 cases, the extent of outbreaks and response, and circumstances where residents have died from the virus.

“We determined early on that families want to know if the virus is in a building,” Parker said.

Greater communication and transparency has been well received by families, and Commonwealth has reaped unforeseen benefits. A media outlet in one of its markets reached out to the provider looking for information on how Covid-19 has affected the community. Because the information was already public, Commonwealth shared all communications between provider and families.

The outlet later wrote a story detailing the response to the pandemic by Commonwealth and two other providers, but the story honed in on Commonwealth’s response, as the other providers declined to comment.

“It’s the right thing to do. We don’t want to add to their level of concern by trying to keep things in the dark,” Parker said.

Recruitment woes

Another possible silver lining of the pandemic was that it might be a boon for providers struggling to fill roles and contending with shallow labor pools. And, while the national unemployment rate has skyrocketed, providers continue to struggle to fill openings.

Part of that stems from enhanced unemployment benefits which were cut significantly in July and are set to expire this month, Parker suggested.

News reports conflating nursing homes with senior living, meanwhile, have cast doubts on the safety of the industry for people seeking employment.

Commonwealth attempted to capitalize on the growing labor pools caused by the outbreak, and launched targeted campaigns online and in social media to recruit new talent. The campaigns did generate the expected views and applications, but have not translated to significant new hires, Parker said.

“We’ll continue to push the effort forward,” he said. “There is still going to be opportunity, once the stimulus [ends].”

Commonwealth is one provider that chose not to implement hero pay across the board. Instead, it offered shift pickup bonuses and drew on workers at neighboring communities to fill gaps in scheduling, where applicable. And the provider is looking at ways to support staff as the pandemic persists, and establish career trajectories and training opportunities, which Parker believes will keep wages stable and build an internal workforce pipeline.

“[More employees] are recognizing that they are health care professionals, than a lot of them may have viewed themselves previously,” he said.

Country Meadows also saw an early increase in applications, which did not translate into new hires. Mills believes the industry must improve its messaging in order to recruit and retain new talent. It was an uphill battle prior to Covid-19, exacerbated by an inability to bring prospective hires into communities for interviews and tours, to show what senior care has to offer.

Providers must also overcome the public relations headaches from the pandemic’s early weeks to show that senior living is a safe environment, and that operators are going above the call of duty to ensure the safety of everyone within the walls of a community.

“You’re much safer going to work at one of our sites than you are going to the grocery store,” Mills said.

By Jim Knapp

We are consistently being asked to advise/comment on post COVID-19 property values, the recovery timeline, the best time to initiate a marketing effort, cap rate movement and other questions pertinent to a senior housing and healthcare service provider, owner, or investor. The knee-jerk answer was, and to a certain extent still is; don’t know…. too early to tell.  After a number of months of this dilemma, we are starting to see some partial answers seep between the cracks or what could be best described as a consistent enough repetition of facts and opinion that is slowly taking the form of an intelligent answer with the typical disclaimers.   The panic that was initiated by COVID-19 has started to subside, but with a cautionary note as spikes are expected. In the past, market changes like this were mainly caused by economic disruptions in banking and real estate or a crisis such as the oil crisis of the 70’s.  This current disruption is unique, and it is reported that the recovery could be “V”, “W”, or “U” shaped.  We are hearing well thought out predictions from the folks at NIC, Marcus & Millichap National Seniors Housing Group, and many other prominent leaders in this industry including owners/operators in the varied markets across our country and the indications are cautiously optimistic.

On the positive side for seniors housing-healthcare assets, we are hearing that many other investment asset classes are faring much worse, such as hotels, retail, restaurants, cinema’s and other venues where crowds congregate.  And, even though the elderly population were the most vulnerable, the residents of senior communities were still paying rent.  The demographic demand for seniors housing and senior healthcare is remaining steady and growing.  Historically, senior health care delivery has protocols in place for this type of event, and even though this one was very trying, the event tested what was already in place and as a consequence of this it is anticipated that operators/owners will be better prepared for this in the future.

It will be interesting to observe over the coming months, to see if smaller senior housing facilities may actually be very desirable to families, residents and prospective buyers, due to smaller segregated gathering spaces and other physical plant characteristics that allow for smaller groups and more segregation to take place, therefore, giving a comfort level of better withstanding a pandemic event.

Another aspect we have learned during COVID-19, is the importance of having a way for residents and family members to connect when apart by online video conferencing.  Every owner/operator of a senior housing facility would benefit by taking the steps to accommodate their residents in this way if they are not already doing this.

Going forward it is vital for providers to seriously examine the middle market senior housing demand.  In a study done by NIC, the National Investment Center for Senior Housing, it is estimated that there will be 14.4 million middle-income seniors by 2029, and that around 54% of them will lack the monetary resources to pay for senior housing at today’s market rates.  This was already a challenge before the recent pandemic and will only be more of a challenge now.  Current and future owners need to creatively search for ways to lower their costs and, therefore offer affordable prices in this ever-growing middle-income market.

Offering lower rental rates will therefore make acquisitions of older, more modestly priced communities more favorable than new construction from a cost basis perspective.  Many senior housing owners are also on the lookout for assets that were hit hard by the COVID-19 pandemic and can be purchased at more favorable prices and be able to offer them to middle-income and lower-income seniors.

M&M Special Seniors Housing Report, Summer 2020

The newest research report from Marcus & Millichap includes

  • Seniors housing sector implements numerous changes to manage pandemic
  • Independent living faces unique risks despite fewer health challenges
  • Long term outlook holds positive for assisted living complexes
  • Pandemic to have far reaching impact on skilled nursing

Read the complete report here

The seniors housing industry has done a good job of protecting residents and maintaining occupancy from COVID-19. Although there have been regionalized outbreaks, most operators are reporting normal attrition and flu season occupancy rates, proving that assisted living is a safe place to house seniors. The biggest risk to occupancy, thus far, seems to be a caution over new admissions by operators and not a lack of interest by clients. Smaller operators have had a better chance of protecting their facilities with the unique ability to minimize harm. With fewer facilities, residents, and staff members to manage, these operators have the unique ability to hyper focus on protocol to provide a facility level focus.

Fear is gradually being replaced by reality, and there finally seems to be a light at the end of the tunnel. Although a return to normalcy will be slow, and seniors housing may be at the tail end of the process, the industry is in a good position to make a full recovery.

It is too early to predict what the long-term effects will be within our industry as a result of the pandemic. We are hearing that many operators feel the need to better store up PPE, and that there could be a slight increase to insurance premiums with the addition of pandemic insurance. Historically, however, the seniors housing business has been fairly recession proof. When it comes to property valuations, we expect that high-end AL communities, seeing compressed CAP rates before the outbreak, will take the biggest hit. But owners that can show historic recovery from similar flu season drops may see very little impact to their overall value.

When it comes to transactions, the pandemic has not been a deal killer, but has noticeably changed contract negotiations. Both buyers and owners are wanting to better protect themselves. COVID-19 clauses aimed at a percentage-based census loss may be here to stay. These clauses, based on the T-12 ADC, are triggered with a 10-20% occupancy drop during the escrow period. The clauses often give the buyer a provision to back out and give the owner an opportunity for correction, or an overall reduction in price is instituted based on actual resident income and NOI. Notwithstanding this cautionary step these occupancy clauses are common in most transactions as seasonal fluctuations in occupancy are not uncommon.

Lenders, although cautious now, should see that the perceived risk is short lived. The timeframe for admission normalization, which may hinge on the availability of rapid testing, is currently the biggest unknown. The longer that banks take to re-engage, the more that deal bounce back could be affected. Term sheets should be out next month, and new underwriting practices may be dictated, but the outlook from those we have spoken with is very positive. Stabilized assets with no COVID issues will likely come back first, with value-add deals following behind.

We could very soon experience a great window of opportunity for both buyers and sellers. The pent-up demand for seniors housing still exists, and earmarked money will gradually begin to flow again. REITS are already starting to move forward with deals, although with caution, and smaller investors are in the wings watching and waiting. Both buyers and sellers should stay in close contact with brokers/advisors to be first in line should a major sell off occur.

Owners desiring to explore future exit strategies, should take this opportunity to have us run your numbers and assess/update your current value. Owners needing to exit the business immediately still have lease to purchase options available, despite the current events. Whether you are looking to sell, buy, or just weather the current storm, we would like to be a valuable resource to enhance your business strategies.

Knapp Group and Stahler Group represent east and west coasts teams of Marcus & Millichap’s National Seniors Housing Group. With a combined 125+ years of experience, knowledge, and resources, together our advisors can provide the most thorough and up to date information from both local, regional, and national perspectives.

by Joseph Knapp

This unprecedented time presents an opportunity for seniors housing transaction advisors to better understand and interpret the unique conditions that impact the sale of a seniors housing community at this time. What made this economic downturn so difficult to forecast was the lack of credible information in the twilight hours of the spread and an understanding of the virus itself. After seeing the initial reaction and response from the seniors housing industry we can see the value and longevity of the seniors housing space. Today we have seen changes in operations, valuation, and the brokerage continuum.  We believe that these challenges will make us more effective in our service delivery going forward.

The fundamentals of the business, due to the demand for seniors housing care, have been steady and rising over the past few years. This demand has not diminished because the demographic has not changed. In addition, the curtailment of new development gives a temporary easing of pressure on existing communities in many markets.

The highest impact on seniors housing businesses are the additional operational costs to maintain a protective environment for staff and residents. This directly lowers the operating margin which directly affects the YE financials for 2020. NOI is the main driving force of value for class A and B assets. Buyers feel this reduction in NOI could alter the valuation for the year. From a selling standpoint we would not discount value due to a lapse in NOI for a quarter due to the pandemic. In addition, seasonal shifts in occupancy are ordinary and a rare event such as this pandemic will eventually be offset by future returns and demand. This all depends how long this event will last. 

If the pandemic wanes by summertime operators may be able to ease costs and pad overtime with the new inventory of prospective employees. A possible influx of new residents due to pent up demand may occur due to easing of tensions over time.  

Brokerage Continuum

As our group works with clients that are currently in the marketing, negotiation, or escrow phase we are positioned to best inform each client on how to effectively navigate these waters of uncertainty.

Deals that are in the marketing phase are in the most volatile position of the brokerage continuum. Onsite visits from prospective investors are on hold and virtual tours are effective but not as impactful. Value add opportunities are difficult to gain excitement considering the challenge of containing the virus. Once things calm down we believe that value add opportunities will gain traction in the market place.

Class A and class B assets are still trading and have understandably required longer due diligence timeframes. These assets in escrow have still been closing in states that still allow cooperation with third-parties, banks, and title companies.

By Andy VanZee and The Knapp Group Team

As of the writing of this newsletter, we have received numerous reports from senior housing operators that, despite Covid-19 related lockdowns, occupancy has predominately remained steady over the past 30 days.  Here at the Knapp Group, we all pray that these trends continue, and seniors and staff can stay safe under the current lockdowns.

Unfortunately, Covid-19 cases are also beginning to show up inside the walls of senior housing facilities.  Though no one knows how such outbreaks will impact operations, the recently enacted Families First Coronavirus Response Act (“FFCRA”) and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), may provide economic relief if operations are negatively affected. 


The FFCRA was signed into law by the President on March 18, 2020 and requires private employers with fewer than 500 employees to provide special paid emergency family and medical (“FMLA”) leave and paid sick leave related to Covid-19 beginning on April 1, 2020.  Under FFCRA, private employers are eligible to receive dollar-for-dollar reimbursement through tax credits for all qualifying wages paid under FFCRA.[1] 


The CARES Act was signed into law by the President on March 27, 2020 and goes further than the FFCRA by providing economic relief to small businesses and nonprofits with fewer than 500 employees through increased funding for the Small Business Administration (“SBA”) loan guarantees and subsidies under the previously established 7(a) loan program and emergency economic injury disaster loans (“EIDLs”)[2]. Additionally, the CARES Act establishes a third loan program call the Paycheck Protection Program (PPP)[3]. Eligible uses of the SBA’s 7(a) and EIDL loans include payroll support, employee salaries, group healthcare premiums, mortgage and rent payments, utilities, insurance premiums and any other debt obligations.[4] 

Under the CARES Act, applicants for EIDLs may request and emergency advance of up to $10,000 (which does not have to be repaid, even if the loan application is later denied).[5]  To receive the advance, the loan administrator is merely required to verify the applicant’s eligibility by accepting a “self-certification.”  Advances are to be awarded within 3 days of an application and can be used for any purpose already authorized under the SBA Disaster Loan Program, including[6]:

  • Providing sick leave to employees unable to work due to direct effect of COVID-19;
  • Maintaining payroll during business disruptions during slow-downs;
  • Meeting increased supply chain costs;
  • Making rent or mortgage payments; and
  • Repaying debts that cannot be paid due to lost revenue.

PPP loans are meant for businesses that typically would not qualify for a loan at local or national bank and can be used to cover payroll, utilities, insurance premiums, and rent and mortgage interest payments on a facility.[7] No collateral, credit test or personal guarantees are required for a PPP loan but the business must be open and operational on February 15, 2020.[8] 

Loan Deferral and Forgiveness

The CARES Act created a loan forgiveness policy for all loans granted by the SBA as part of the Covid-19 response. Recipients of all SBA 7(a) loans are presumed to qualify for complete payment deferral relief (principal, interest and fees) for 6 months to one year.[9] 

Recipients of SBA 7(a) loans may also be eligible for loan forgiveness in an amount that does not exceed the principal of the loan but equal to the what the borrower spends in the eight weeks after the loan is originated, including[10]:

  • Payroll costs;
  • Interest on mortgage obligations;
  • Rent on leasing agreements; and
  • Utilities (electricity, gas, water, transportation, telephone, or internet). 

To receive dollar-for-dollar loan forgiveness, employees must remain employed through the end of June and the employer must submit supporting documentation to their lender, including proof of verification of employees.[11]  Loan forgiveness will not be included in the borrower’s taxable income.[12] 

Additional Information

For more information about any of the loan types described above and how to apply, please visit the SBA’s website, the IRS Coronavirus Tax Relief page and U.S. Chamber of Commerce.   

[1] Hylant:

[2] The National Law Review:

[3] Id.

[4] The CARES Act, § 1102.

[5] Steptoe & Johnson, LLP:

[6] Id.

[7] The National Law Review:

[8] U.S. Chamber of Commerce:

[9] The CARES Act, § 1102.

[10] U.S. Chamber of Commerce:

[11] The CARES Act, § 1102(d).

[12] The CARES Act, § 1102(i).

Just over two weeks ago, we were writing an article about our company’s experience at the Spring NIC Conference and our outlook for the upcoming year.  All indications for 2020 looked strong; our 1st quarter BOV numbers were high, investors were excited to do business, and the lending market was on par.  Less than a week after NIC, the realization of COVID-19’s presence within our nation became a reality and its impact quickly grew as the days progressed.

We are now facing an unprecedented time of uncertainty, with projections for normalization ranging anywhere from 6 weeks to 6 months.  Some believe that when things settle there will be a V-shaped economic rebound, and others suggest that this could be the beginning of a recession. On a national level, our government has taken some serious steps to slow the spread of the virus, flatten the bell curve, and not overwhelm our healthcare system. The effects of these actions are expected to be long felt. 

There is a major concern, specifically within our industry, about the impact this virus may have on residents.  Over the past week, operational challenges have been voiced by many facility owners regarding staffing, supply chain, and new admissions. Some groups have transitioned to virtual meeting rooms for conducting new resident interviews, which seemed to work well for them.

As brokers and consultants, our goal during this time is to stay informed and to pass that information along to our clients and colleagues. We are in regular contact with operators, lenders, and investors, and will continue to do so at an even greater level over these next few weeks and months. Our firm holds weekly, national, and local conference calls to discuss market conditions, and we are staying in regular contact with our National Seniors Housing Group to discuss what is happening within the industry.  As opposed to speculating and giving opinions about the unknown, we will be providing weekly updates on the changes within our industry, the state of our economy, and the direction of our country.

In relation to the investment world, most buying groups are still interested in looking at new opportunities and are engaged in the transactions they have been underwriting. Some have identified that they are taking a more conservative approach in qualifying the properties they are considering, but still desire to see new inventory. There have been select groups that feel there will be great opportunities on the acquisitions side once things normalize and are waiting to invest their equity at that point of the cycle.

Lenders appear engaged and optimistic in getting transactions done. There have been a few lending options that have dried up during this time, but for the most part, it is business as usual. Many groups feel this pandemic has an end in sight that will not extend beyond a standard deal cycle, but we anticipate and have seen extended due diligence periods for both borrows and lenders.

A popular topic of discussion has been what type of economic rebound we should expect.  Many conversations and projections to date have not taken into account the stimulus packages that has been initiated. We will discuss this in greater detail in one of our future updates.  

We wish you well,

The Knapp Group Team

  by Jim Knapp 

Knapp Group Founder/CEO


2019 was a banner year for real estate investors, including investors in the senior housing market.  With the unprecedented market fundamentals still at work, investors are just as optimistic about 2020 and remain active in the seniors housing sector due to the following:

  • Unprecedented strong market fundamentals
  • Current growth cycle length setting all time historical record. 
  • Rarefied low interest rate territory, with Ten-Year Treasury closing last week at 1.84%. 
  • Cap rates near record lows.  
  • Responsible development/construction pipeline, with a little upward supply pressure in the seniors housing sector.
  • Tremendous amount of equity flowing.  
  • Tremendous amount of debt flowing.  
  • Lack of investment alternatives with possible stock market correction.
  • Concern over changes to Capital Gains Tax Laws with ensuing election.

This is an optimistic scenario, and as always, market dynamics vary greatly from state to state, urban to rural, etc.  What we are also hearing in senior housing and long-term care circles, is the attention to a physical plant and care model that remains functional and addresses resident needs and desires well into the future.

Durability, adaptability and creativity are all being seriously considered as we have moved into a time where a fair amount of new product has entered the market.

Any change, whether it is a supply matter or a reimbursement/payor source change, presents renewed pressure to address these new variables, and owners are again pressed to think and adapt to these changes.  

One of the factors we are currently seeing, is that the older product has become significantly older in the past few years.  This is directly a consequence of newer buildings being constructed.  Although residents prefer to stay close to their known home and relatives, a newer, nicer product that delivers similar services, even if there is a nominal increase in price, will cause a senior resident to move a little further than initially desired.

Owners of older buildings will need to weigh any revenue misses that may be due to lower than market rates and/or occupancy issues against the overall cost to upgrade a dated physical plant when considering current and/or future exit or hold strategies.


Aging Population Paints a Promising Outlook: Elevated Yields and Strong Demand Draw Investors

Demand side pressures are building in the seniors housing market as approximately 73 million baby boomers move further into retirement.  The favorable yield profile and consistency of demand have excited the investment community, motivating more investors to make their first foray into seniors housing.

Key Features include:

  • Baby boomers quickly approaching 75 to begin placing greater demand-side pressures on seniors housing
  • Seniors housing industry exiting a construction cycle, manifesting in tailwinds for the sector
  • Pace of occupancy erosion slows to a crawl and will nearly meet supply gains this year
View Full Report



Healthcare Policies, Focus of Patient Care Challenge Operators

Operators leverage healthcare policy changes to drive profitability. Nursing care communities, also known as skilled nursing properties or facilities, account for the largest share of the seniors housing industry. Operators at these properties treat both long-stay custodial care patients as well as short-stay post-acute care patients. Unlike other seniors housing property types, the segment is highly dependent on Medicaid and Medicare reimbursement programs, deriving 71 percent of revenue from these sources. National and state healthcare policies have a more direct impact on the property sector and expanded managed-care and value-based care policies must be navigated by operators to maximize returns.

Trend toward short-stay post-acute care patients contributes to falling occupancy. According to the NIC MAP® Data Service, nursing care community occupancy rates have fallen from more than 90 percent in 2008 to nearly 86 percent in the third quarter. The nursing care sector has faced a number of challenges impacting demand and driving down the length of stays, thus impacting stabilized occupancy rates. The heightened emergence of assisted living facilities over the past two decades has given individuals another option to long-term care. Meanwhile, healthcare policy changes to lower costs and drive efficiency in post-acute care have resulted in shorter stays. Both have placed downward pressure on stabilized occupancy rates, forcing operators to consider other factors, such as the number of patients cared for, when looking at th health of nursing care properties

National Trends and Challenges

  • According to the Social Security Administration, a person turning 65 today will live, on average, well into his or her 80s, with 25 percent of those individuals’ lives extending past age As the 65 and older population is set to rise by more than 17 million individuals over the next 10 years, more than half of this growth will occur in Americans older than 75.
  • Demand for seniors housing facilities is anticipated to rise substantially over the next several years, and staffing shortages for nursing aids and assistants are already posing a problem in some areas of the These employees have realized a slower pace of wage growth when compared with other industry segments, leading to many workers choosing employment in other economic sectors.


Click here to view complete report which includes construction, occupancy, rent, and sales trends.


Don’t be fooled by an inflated business valuation

One of the quickest ways for a real estate agent to impress a prospective client is to propose a higher than expected selling value for their property.  Although many times the inflated value can be justified, too often it is without merit and simply being used as a ploy to obtain the listing.   Before selling, there are a few important concepts that every owner should understand about business valuations and pricing.

  1. If a valuation seems too good to be true, proceed with caution. A reputable agent will spend quite a bit of time digging into the financials of a business before proposing a selling price.  A valuation that cannot clearly be defended using a client’s income/expense statements is not worth going to market with.
  2. Pro-forma numbers are nothing more than an educated guess. Although they can be used by real estate agents to defend an aggressive selling price, proformas are not usually an accurate way to value a business.  Because they cannot be supported by a company’s financial statements, projected earnings often hold little to no weight with savvy buyers.
  3. Going to market with an overpriced property can do more harm than good.  Asking an unreasonably high price for a property just to “test the market” may deter the best prospects from even looking at the details of the listing.   Not only does it hurt the credibility of the listing, overpricing a property can significantly extend the time the listing sits on the market, making it even less desirable to potential buyers.

Don’t be fooled by an inflated valuation.  Choose an agent that you can trust.  With over 20 years in the seniors housing industry, Knapp Group agents have heard countless stories of owners being enticed by exaggerated listing prices that don’t hold weight when the property actually goes to market.  In the end, such properties sit with little to no activity until the price is dropped or the listing expires.  It is not only a huge disappointment to the owner, but also a waste of their precious time and energy.

Knapp Group has a proven and long-standing history of accurate business valuations, multiple offers, and some of the highest list to close ratios in the industry.

  • We average 4 offers per listing
  • Our average selling price is 95% of the list price
  • Our average selling price is 98% of the valuation price
  • We close 9/10 properties that we list


Contact us today for a thorough and accurate valuation of your seniors housing business.


View this month’s complete Knapp Group Newsbrief here

Changing Outlook on Homeownership Strengthens Demand for Seniors Housing; Crossover Capital Increases Pool of Buyers

Seniors housing demand invigorates as homeownership becomes less advantageous under the new tax code.   Changes to the tax law beginning in 2018 could benefit the seniors housing market as the advantages of homeownership are reduced, prompting some senior residents to sell single-family homes and move into senior communities. Homeownership in the 75 and older age segment has fallen for four consecutive years after peaking at a high of 80 percent in 2012 and 2013, resting at 76.8 percent at the end of 2017. A healthy housing market and benefits from itemizing housing-related expenses, like mortgage interest payments, fall under new rules that could entice additional seniors to sell homes and use proceeds to live in smaller, age-restricted housing communities. Construction, especially in the assisted living space, has grown substantially over the past few years, but demand for seniors housing should strengthen, boosted by these changes and an aging population.

Solid demographics, favorable economic outlook attract new buyer pool. REITs, private capital groups and owner-operators are all active in the seniors housing sector, and the emergence of crossover capital is growing the buyer pool for available assets. Rising interest rates are compressing yield spreads across commercial real estate assets, but with initial returns in seniors housing historically 50 basis points to more than 200 basis points above other property classes, spreads will remain favorable amid a period of increased borrowing costs. More mainstream awareness of seniors housing is also contributing to a boost in buyer demand, and investors drawn to the business component of the industry will find unique value-add options to generate higher ROIs.

Investment Highlights

  • REITs  have been restructuring portfolios over the past couple of years and are seeking to redeploy funds this year, targeting robust cash flowing deals in familiar markets.
  • Stabilized seniors housing properties in primary markets trade at a premium, with AL and IL facilities capturing first-year returns between 6 percent and 7 percent. Initial yields for skilled nursing assets are often above 10 percent.
  • Private funds and equity funds are moving into the seniors housing sector, providing a source of financing options for turn-key assets and development deals.

2018 Seniors Housing Market Forecast

Independent Living (IL): Healthy demand keeps stabilized occupancy close to the fi ve-year average, dipping 20 basis points year over year to 91.3 percent. The minimal decline in occupancy does little to thwart rent growth, and the average rises 1.7 percent to $3,158 per month.

Assisted Living (AL): Inventory growth outweighs demand this year, contributing to a 50-basis-point drop in the stabilized occupancy rate to 88.1 percent. Rent growth will slow as a result, reaching $4,663 per month on a 1.5 percent annual gain.

Skilled Nursing (SN): Stabilized occupancy continues to decline in 2018, falling 80 basis points to 85.3 percent, a new low for the last decade. Rising healthcare costs continue to drive up the average daily rate, however, which reaches $318 per bed per day, an increase of 2.3 percent from last year.

Continuing Care Retirement Communities (CCRCs): Absorption remains healthy this year, and the segment will be the only to post an increase in occupancy as the stabilized rate rises 30 basis points to 91.5 percent. Rent growth remains strong, with the average advancing 3.2 percent to $3,322 per month in 2018

View complete First Half 2018 National Seniors Housing Report

Aging Population Driving Seniors Housing Market Growth; Healthcare Reform Uncertainty Has Investors Reviewing Portfolios

Demographic factors, economic growth curb concerns of overbuilding in select markets. The aging population remains a main driver in seniors housing construction. Out of the nearly 55,700 seniors housing units underway at the end of the second quarter, approximately 23,600 are located in 10 markets, with major metros such as Chicago, Atlanta, Phoenix and Dallas lead-ing the way. While concerns of overbuild-ing linger, these worries are concentrated at local levels and the majority of markets will emerge unscathed from the current con-struction cycle. Strong population growth and stable or expanding economies will drive demand for the thousands of units coming online in some of these markets. Metros with rising tax burdens or where companies are choosing to move to more business-friendly climates could generate moderate seniors housing demand as seniors move closer to adult children. Overall, the number of units underway is minimal when compared with the population of the baby boomer genera-tion the sector is preparing for.

Sales activity declines; investors cite concerns about uncertain health insur-ance changes. Some investors are paus-ing seniors housing investment activity as concerns over healthcare legislation loom. Changes to the Affordable Care Act are uncertain, but the act stands as law, and providers and insurers must comply. Fur-thermore, adjustments will likely not take ef-fect overnight, giving those impacted time to react and adjust before changes are imple-mented. Rising demand for seniors housing units as the general population ages will not change, however, and operators will man-age any healthcare legislation changes in order to maintain favorable returns.

Investment Highlights

  • REITs are net sellers this year while they rebalance portfolios, also con-tributing to a decline in transaction velocity. The restructuring could re-sult in increased future sales activity as they purchase IL and AL proper-ties with funds raised after selling off skilled nursing facilities.
  • Private equity funds are picking up the slack as REITs sell off properties, providing operators with the oppor-tunity to grow.
  • Stabilized seniors housing properties in primary markets are in highest de-mand, with AL and IL properties cap-turing cap rates between 6 and 7 per-cent. Memory care assets can trade for initial yields in the 7 percent area.

2017 Seniors Housing Outlooks

Independent Living (IL): Strong absorption trends keep stabilized occupancy within range of the last three years, reach-ing 91.3 percent at year end. The average rent advances at a healthy pace, climbing 2.6 percent to $3,101 per month.

Assisted Living (AL): Stabilized occupancy falls 40 basis points this year as supply additions outweigh demand. The rate has been on a steady decline for the past four years as deliveries are elevated. Despite the dip, demand is strong and average rent rises 3.6 percent to $4,624.

Skilled Nursing (SN): Stabilized occupancy will decline 60 basis points this year, continuing its downward slide, to 86 percent. Rising healthcare costs push operators to increase rates, and the average daily rate will rise to $311 per bed per day, a 2.6 percent annual increase.

Continuing Care Retirement Communities (CCRCs): Healthy absorption trends increase stabilized occupancy 60 basis points to 91.5 percent in 2017. Strengthening demand prompts a 2.9 percent year-over-year advance in the average rent to $3,194 per month

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