Q&a: Buyer-seller Standoff Eases

A broker shares his view on the seniors housing and care properties market. 

For over two years, a persistent bid-ask spread between buyers and sellers of seniors housing properties prevented many deals from getting done. 

Seniors Housing Business (SHB) caught up with Brian Chandler, senior managing director and national practice leader for seniors housing for Raleigh, N.C.-based Partner Valuation Advisors. As an appraiser in the seniors housing and care sector, he is privy to in-progress deals months before closing, including transaction data. 

He says a growing number of buyers and sellers are agreeing to close transactions and shares more here. 

SHB: Some experts say a growing number of seniors housing deals are on the brink of getting done. What have you observed in your business?

Chandler: We have been seeing activity pick up with acquisitions and refinancing. In a valuation/advisorycapacity, we’re currently working on several acquisitions of top-quality assets, as well as portfolios. 

We started seeing more activity and trades in April. We are optimistic that activity will pick up even more in 2025, not just for seniors housing, but across the real estate spectrum.

Going into 2025, there is a high volume of seniors housing loan maturities due to come up in the next 24 months. So, if market becomes less volatile and these loan maturities are not refinanced or extended, we expect to see an increase in transactional activity. 

SHB: The Federal Reserve has begun to cut its benchmark interest rates. Is that what everyone has been waiting for?

Chandler: It’s definitely not the whole story. It’s a combination of things, including the rate cuts and how inflation is being handled. Obviously, the election has been top-of-mind recently, due to a potential change in monetary policy. It appears that the 10-year Treasury Yield will remain above 4.0 percent for some time, which could weigh on investment activity. 

SHB: How wide is the gap between the prices that potential sellers are willing to accept for their seniors housing and care properties and prices that buyers are willing to pay? How is that changing?

Chandler: Based on the deals we have worked on that transacted during the second half of 2024, the “bid-ask spread” has been diminishing. Back when the interest rates started to increase, the difference between asking prices from potential sellers and bids from potential buyers was probably close to 10 percent. Now, the bid-ask spread is below 5 percent.

SHB: Have potential sellers lowered their prices, pushing cap rates higher? 

Chandler: Cap rates have increased over the last 18 to 24 months. Cap rates during peak pricing prior to August 2022 would probably trade at 50 to 75 basis points lower than today depending on the quality of the asset.

SHB: Are cap rates likely to rise even higher?

Chandler: Cap rates are flattening out and not increasing further. They’re still higher than they were pre-pandemic, obviously, and before the interest rates started going up prior to August 2022. 

SHB: What kind of deals are getting done?

Chandler: There have been more trades recently of assets that combine independent living, assisted living and memory care. In addition, we have actually been involved on several new development deals on a national basis, which is good to see, as new development in seniors housing has been stagnant.  

SHB: What about independent living properties?

Chandler: There has not been a significant number of quality trades for this asset type. Some independent living owners are doing well on their operational margins and want to continue to hold onto their assets. Maybe it’s another 12 months, or another 18 months, before they will consider selling their property. Most people believe that cap rates in the next 12 to 18 months could decrease. Independent living is a little simpler to operate as you have limited services to provide, such as meals and housekeeping. 

SHB: What kind of investors are buying seniors housing and care properties? Private equity funds?

Chandler: There are also some pension funds that have been involved. However, they’re very particular about the assets that they want to acquire. We have worked on several deals lately involving life insurance companies as well. 

SHB: Why are these deals trading?  

Chandler: It has to do with the quality of asset and the location. There are still investors out there looking for a sound investment in seniors housing with a strong history of positive operational metrics and a high-quality operator in place. It started really picking up over the last six months. In addition, there is still limited new supply in the market, and the demographics for seniors housing speak for themselves. 

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