Seniors Housing Executives Predict Increased M&A Activity, According to Capital One Survey

BETHESDA, Md. — Seniors housing executives have a generally optimistic view for mergers and acquisitions activity heading into the fourth quarter of 2017, according to a survey by Capital One. Approximately 89 percent of respondents believe M&A activity will maintain its current pace over the next year, with about half of those believing the pace will increase.

Bethesda-based lender Capital One conducted the survey in early September 2017. It asked professionals to provide their 12-month outlook on a number of issues in the seniors housing and skilled nursing space. Respondents included 157 senior executives from healthcare companies, including pharmaceutical and medical technology companies, hospitals, healthcare service providers and health systems, as well as other industry participants.

In another survey question, respondents were asked to name the greatest financial challenge facing the industry. Labor cost pressure was the top concern at 33 percent, with supply and demand imbalances following close behind at 32 percent. The regulatory and reimbursement environment was the next largest concern at 21 percent.

Further fueling the sentiment that M&A activity will be a focal point for the industry, just four percent cited availability or cost of capital as their top financial challenge.

“The uptick in acquisition interest is a positive sign for the industry,” says Chris Taylor, managing director at Capital One Healthcare. “It could be a reflection of some of the concerns we’ve seen over the past year about a potential unevenness in the supply and demand for newly developed seniors housing properties in some sub-markets.”

The acquisition of existing facilities was cited by 37 percent of respondents as the strategy that would present the greatest amount of opportunity in the year ahead. Another 30 percent cited repositioning of older properties as their chief focus. For comparison, just 19 percent of executives currently view new development as the best opportunity.

The focus on M&A brings with it the expectation that real estate term loans will drive financing. Thirty percent of respondents named this as the most important form of financing for their organizations in the year ahead.

Highlighting the current industry emphasis on revitalizing existing properties, 22 percent of respondents selected refinancings as their principal financing need for the year ahead. An equal number cited construction loans.

Geographically, executives expressed particular interest in the Southeastern and West Coast markets, with 26 and 22 percent, respectively, citing these areas as those that offer the most opportunity in the year ahead.

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