$25 Billion in Health Care Dealmaking Expected in 2022 as Interest in SNFs Has Cooled

While price per bed valuations soared in the skilled nursing space in 2021, some investors in the market don’t see nursing homes as hot of an asset in 2022, especially compared to other health care properties.

“High-acuity health care facilities such as skilled nursing facilities and wellness centers will have reduced demand in 2022 compared to 2021,” commercial real estate services firm CBREfound in its Senior Housing & Care Investor and Developer survey.

CBRE estimates $25 billion will be invested in health care real estate in 2022 – and while investment in life sciences real estate, medical office buildings and ambulatory services is expected to pick up – investment interest in SNFs seems to have cooled.

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Only 19% of respondents said they expected higher demand for SNF assets in 2022, while 58% expected it to be the same and 23% expected demand to decrease.

Supply of these assets is also expected to stay the same in 2022.

The survey was sent to more than 500 of the “most influential” health care real estate investors, including health care real estate trusts (REITs), institutional health care investors, private capital investors and developers throughout the United States.

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The respondents were asked COVID-19 pandemic-related questions and 31 questions surrounding different facets of health care and life sciences real estate markets, including which seniors housing and care segments presented the biggest opportunity for investment. CBRE received 104 responses total.

Only 10% of respondents said they were most interested in SNFs. Medical office buildings, on the other hand, were the most sought after asset.

CBRE Investor and Developer survey

Still, the majority of investors indicated plans to be “net buyers” of health care real estate in 2022, with 100% of all health care REITs, 84% of private capital investors and 100% of all institutional health care investors saying as much.

Most (81%) investors indicated their preferred portfolio transaction size was below $250 million. Specifically, 90% of both developers and private capital investors are targeting investments below $250 million.

Most respondents indicated that the cap rates for SNFs would most likely be somewhere between 5.5% and 8% for 2022.

The skilled nursing and seniors housing transactions volume has come down a bit after a record-breaking end of 2021 with 127 publicly announced deals in the first quarter of 2022 compared to 140 transactions in the previous quarter, according to new acquisition data from LevinPro LTC.

Dealmakers spent $3.87 billion on first quarter transactions in the space, a 2% decline compared to the previous quarter’s total of $3.94 billion.

“I don’t think that the values are going to continue to appreciate at the rate that they did during Covid because that was really a function of increased reimbursement,” Blueprint Co-Founder and newly named Chief Vision Officer Jacob Gehl recently told Skilled Nursing News. “The real question is do they hold at this number or do they start to trickle back down.”

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