Skilled nursing mergers and acquisitions (M&A) activity contributed to an overall strong third quarter, as as nursing care accounted for $3.5 billion of the total $5.0 billion in transactions volume for the quarter, according to a report by the National Investment Center for Seniors Housing and Care (NIC).
Seniors housing accounted for the remainder ($1.5 billion) of the overall total.
The sum of all transactions volume in the third quarter was up 129% from the second quarter’s $2.2 billion, and up 6% in a year-over-year analysis, when volume totaled $4.7 billion.
Bullish Public Buyers
In recent years, public buyers—specifically those that are publicly traded in equity markets—have been gun-shy, according to NIC Senior Principal Bill Kauffman, author of the report.
“Since the end of 2015, the public buyers, especially publicly traded real estate investment trusts (REITs), have been relatively quiet in terms of dollar volume,” Kauffman explained in his report.
This was quite the contrary, however, as they were more bullish in the third quarter, with public buyer volume increasing dramatically, up 733% from the second quarter. In monetary values, public buyer activity registered $2.9 billion in closed transactions in Q3, compared to $345 million last quarter.
Analysts would have to track back to the second quarter of 2015 to see similar performance by public buyers, when $5.6 billion of volume closed, according to Kauffman.
Public buyer volume not only saw a large increase over the past quarter, but also from the third quarter of 2016, when $1.4 billion was registered.
“The main reason for this jump in volume was the large Sabra/Care Capital Properties deal that closed in the third quarter,” Kauffman said. “This deal represented $2.1 billion of the $2.9 billion public volume, and included 331 skilled nursing properties.”
In addition to this transaction, Kauffman also highlighted the Omega transaction to purchase 15 skilled nursing properties from Kindred for approximately $200 million. Further, Kauffman noted Sabra’s purchase of a seniors housing and care portfolio for $430 million, which had 24 properties included in the sale package.
Institutional and Private Buyers
Deals facilitated by institutional buyers also increased significantly from the prior quarter, according to Kauffman’s report.
Volume within this category increased 225% from $275 million in the second quarter to $896 million in the third quarter.
However, institutional volume was down 49% in a year-over-year analysis.
Kauffman pointed out a deal closed by Kayne Anderson, the institutional alternative investment manager that bought a $633 million portfolio from Sentio Healthcare Properties, which consisted of 32 seniors housing and care properties. This deal included some medical office building (MOB) properties which are not reflected in these volume numbers.
In broader strokes, Kauffman noted a longer-term trend of institutional buyers growing their shares of the seniors housing and care transaction market, as public buyers have been less aggressive.
“In 2015, institutional buyers represented 15% of total transaction volume which increased to 30% of volume in 2016. Institutional volume is now at 32% at the third quarter mark in 2017,” he said.
In comparison, public buyers represented 53% of the transaction volume in 2015 and now represent 31% as of the latest data set through the third quarter in 2017.
However, private buyers have been consistent, representing a “steady volume” of transactions, with a 31% representation in 2015 and 34% share as of the latest data.
Private buyers have been steadily above $1 billion of closed transactions each quarter for the last four years, according to Kauffman’s report. The private buyer volume dropped 23% in the third quarter from the prior quarter; however, it once again came in at $1 billion or more at $1.1 billion. When compared to the same quarter last year, the volume also dropped 23% from $1.5 billion.
Written by Carlo Calma