By Beth Mattson-Teig
Real estate investment trusts (REITs) have their foot firmly on the gas when it comes to acquiring seniors housing assets, and they’re taking full advantage of the opportunity to buy at below replacement cost.
The appetite to grow portfolios, particularly on the private pay side of independent living, assisted living and memory care, comes as no surprise given the combined tailwinds of growing consumer demand and a slowdown in new supply.
While the aging population has led to accelerating demand, the high cost of development has forced a sharp pullback in new deliveries.
Between now and 2035, the 85-plus population is expected to grow nearly 60 percent, increasing from approximately 7 million to more than 11 million. At the same time, developers are tapping the brakes on new projects.
In the first quarter of 2025, seniors housing construction starts in 31 primary markets tracked by NIC MAP totaled 1,076 units for properties that are a majority independent living or majority assisted living, the lowest count since 2009.
“Frankly, investors have been waiting for this boomer generation to hit and start to move into seniors housing for some time. It’s been anticipated, and it’s now actually starting to bear fruit,” says Talya Nevo-Hacohen, chief investment officer at Tustin, California-based Sabra Health Care REIT (NASDAQ: SBRA).
During Sabra’s first-quarter earnings call, the company indicated that it had a robust deal pipeline with over $200 million in awarded deals expected to close this year.
Public REITs have been leading the charge on acquisitions over the last 12 to 24 months. During the first quarter of 2025, Toledo, Ohio-based Welltower (NYSE: WELL) recorded $6.2 billion in seniors housing investments, which is higher than the company’s entire 2024 investment total of $6 billion.
Welltower’s first-quarter investment volume included a previously announced agreement to acquire a portfolio of 38 ultra-luxury seniors housing communities and nine entitled development parcels in Canada from Amica Senior Lifestyles, valued at roughly $3.35 billion.
Private real estate groups, ranging from large institutions and private equity funds to smaller investment companies, have been less active in this relatively high-interest rate environment.
“Private equity is coming back quietly,” notes Nevo-Hacohen. “We see them occasionally on deals, but it’s not like the years leading into COVID where we saw very active private equity in the seniors housing market buying, developing, owning and flipping.”
Although there is definitely interest in seniors housing from private equity, those groups tend to be more active sellers right now, she adds.
REITs are leveraging their liquidity with access to both equity and debt markets that is giving them a cost of capital advantage over private equity in the higher interest rate environment.
Despite rate cuts by the Federal Reserve last year, the U.S. 10-year Treasury yield is still hovering around 4.3 percent, well above the average over the past decade of roughly 2.5 percent.
According to that National Association of Real Estate Investment Trusts (NAREIT), the total return for the healthcare REIT sector year to date as of July 9 was 10.4 percent, and 23.6 percent for the 12-month period.
“The public sector is valued on a forward basis. So, the expectation you see from investors is that this is a really strong trend that will continue for the next decade or so. That’s why you’re seeing the return to the public market be so robust,” says John L. Sweeny Jr., co-head of senior housing capital markets at CBRE.
Ventas eyes $1.5 billion in deals this year
A robust pipeline of deals is prompting some REITs to raise expectations on acquisitions. For example, Chicago-based Ventas (NYSE: VTR) increased its guidance on acquisitions from $1 billion to $1.5 billion for full-year 2025. The REIT’s investment strategy is guided by its “Right Markets, Right Assets, Right Operator” approach.
“We’re focused on high-performing communities with upside across geographic markets and asset types,” says Justin Hutchens, chief investment officer and executive vice president in charge of the seniors housing portfolio at Ventas. “They’ve established market leadership. They’re high quality. And they’re in markets that have strong net absorption and strong affordability.”
The REIT closed on $2.8 billion of seniors housing investments from the start of 2024 through April 30, including $900 million in the first four months of 2025. Its investment activity in the first four months of this year alone added 20 newer vintage communities across eight states, including 11 in high-demand Texas markets.
In Texas, specifically, the REIT is capitalizing on markets with strong demographics and limited supply. According to Hutchens, the REIT’s Texas markets are expected to average a 29 percent growth rate in the 80-plus population over the next five years and less than 1 percent annual growth in supply.
Ventas is buying assets at below replacement cost, with a target of between 7 and 8 percent year-one yields and an unlevered internal rate of return (IRR) in the low-to-mid teens. “We’re in an enviable position of getting strong yield, growth and high-quality all in one package,” explains Hutchens.
NHI is buying below replacement
Acquisitions are an attractive alternative in a market where it’s tough to make the numbers pencil on new development. It’s difficult to build new projects for less than $300,000 to $400,000 per unit, whereas REITs are still finding buying opportunities in the range of $200,000 to $250,000.
“You could view that as the real estate is still 50 percent off. So, we’re focused on acquisitions,” says Kevin Pascoe, chief investment officer at National Health Investors (NYSE: NHI) based in Murfreesboro, Tennessee.
The company estimates its current investment pipeline at $331.4 million, which is about double the pipeline it had at the same time last year. That volume includes $126.7 million in signed letters of intent, of which approximately $71 million represents a senior housing operating portfolio (SHOP) investment.
Unlike a traditional net-lease structure in which a tenant enters into a long-term contract to lease space from the REIT with built-in rent increases, the SHOP structure enables the REIT to participate in the operational cash flows both positively and negatively. The rents are tied directly to the property’s revenues.
NHI announced in March that it had invested $46.3 million for the acquisition of Juniper Village at Paramus, a seniors housing community in Bergen County, N.J. The facility, which is operated by Juniper Communities, features 98 assisted living units and 22 memory care units. The acquisition was structured as a triple-net lease with a 15-year maturity and two five-year renewal options at an initial yield of 7.95 percent, plus annual fixed escalators.
Pascoe attributes the growth in its investment pipeline to more sellers coming to the market. “We’re still seeing a lot of retreads, where buildings come out and then (a seller) pulls it back because the market is not quite where they want it to be,” notes Pascoe.
But the company also is seeing more owners looking to sell assets for a variety of reasons. “Just because it’s a good time to buy doesn’t mean that we’re going to just be asset aggregators,” says Pascoe.
“It’s important to make sure you have the right real estate, you have the right partners, and we’re doing the right deals for our shareholders and for the long-term health of our business,” he emphasizes.
REITs also are continuing to keep a close eye on issues such as inflation and labor trends at the local level that can impact individual properties.
“It’s a great time to be in the industry. We’ve got a lot of tailwinds, but it is an operating business,” he says. “Real estate is what gets traded, but ultimately, it’s what goes on inside the community that brings value.”
Sabra targets newer vintage assets
Acquisition strategies vary depending on the company, but REITs agree that they’re seeing a growing pipeline of newer vintage assets coming to the sale market. Prior to COVID, cheap debt spurred a lot of construction activity.
Some of the assets now coming to the market for sale are projects where the developer can’t refinance the debt in a way that makes any sense. In other cases, it’s a fund with a five- to seven-year hold that has gone past the expected lifespan and is looking to sell so its investors can exit.
Sabra is continuing to see a high level of buying opportunities of newer vintage assets between 5 and 10 years old that are either stabilized, or there is a clear path to stabilization in the near term.
“What we’re not seeing much of are skilled nursing facilities, which have a greater supply-demand imbalance, says Nevo-Hacohen.
Sabra is focused on the spectrum of independent living, assisted living and memory care, and especially those properties that have the three care levels in one building in the right proportion.
The REIT is investing primarily in secondary markets but also will consider assets in tertiary markets. “We have generally been agnostic as to market, as long as the stats make sense,” says Nevo-Hacohen.
The management team is looking closely at potential residents and market penetration levels and existing supply, as well as labor availability.
One of the lessons learned during COVID is the critical nature of labor to SHOP operations and net operating income, she adds.
DHC focuses on repositioning
Diversified Healthcare Trust (NASDAQ: DHC) is one of the few seniors housing REITs that has been a net seller of assets over the past few years as it has worked to reposition its portfolio and pay off debt maturing in 2025 and 2026.
“The focus for us has been balancing continued investment in our communities to drive performance because there is significant embedded upside, while also implementing strategies to strengthen our balance sheet,” says Chris Bilotto, president and CEO of Newton, Massachusetts-based DHC.
The REIT’s overall strategy is to reposition and delever its balance sheet, which includes selling both SHOP, medical office buildings and life science assets.
The company has roughly 30 seniors housing communities currently in various stages of disposition, whether they’re being marketed for sale or are already under contract for sale. The expectation is that the majority, if not all, will close in the second half of the year.
The REIT also has been investing heavily in its SHOP Refresh Program. During 2024, the company completed 21 projects, and for the full year of 2024, DHC’s total capital expenditure for maintenance and repositioning capital amounted to $191 million, with $140 million directed toward its SHOP communities.
Guidance for this year estimates the REIT’s spending on capital expenditures for the SHOP portfolio will range between $105 million and $120 million, which includes both maintenance capital and repositioning capital.
“The company, and the portfolio, is going to be in a very different place when we hit January, having taken care of a lot of these initiatives through asset sales, deleveraging, and overall SHOP performance improvement,” predicts Bilotto.
“We are trending toward a scenario where there’s positive cash flow, shifting the narrative toward thinking about our dividend and being an acquirer of assets,” he adds.
LTC leans on best-in-class operators
A key component of REIT investment strategies is the relationships they have developed, and continue to develop, with strong operators.
“The tailwinds are absolutely there, but they only matter if you execute. We’re investing with regional and national operators who know healthcare and know their markets,” says Dave Boitano, chief investment officer at Westlake, California-based LTC Properties.
LTC is continuing on its path to expand its portfolio and operator relationships through seniors housing investments using the REIT Investment Diversification and Empowerment Act (RIDEA) structure.
The company has forecast a $300 million investment pipeline of which RIDEA deals will consist of approximately 80 percent. The RIDEA structure allows the company to align directly with operators on performance.
“We complement that with structured finance investments that deliver strong risk-adjusted returns. And when development makes sense where the market fundamentals are sound, the demand is clear, and we have the right operator relationship, we’re fully capable of stepping in,” he says.
REITs such as LTC remain focused on long-term growth and long-term relationships. “Conceptually, we’re building a portfolio with our operators wherein one-and-done deals are not the focus,” says Boitano.
“Instead, the first investment lays the foundation, and then subsequent opportunities form the enduring structure of a long-term relationship.” The aim is to better understand each other’s strengths and capabilities so that they can build a relationship that gets stronger over time, he adds.
LTC also believes that its alignment with operators gives the company a competitive advantage. The management team is able to see new investment opportunities both through marketed processes and directly through its operator relationships.
“Partnerships are at the core of our opportunity pipeline and some great opportunities come from working with existing partners who are growing and are closest to new situations,” says Boitano.
Across the board, REITs are working to strengthen portfolios with strategies that focus on both external and internal growth. Fundamentals are finally catching up to the demographic story that the industry has been anticipating for years.
“Occupancy has rebounded sharply, supply remains constrained, and demand is accelerating. For LTC, we’ve positioned ourselves to capitalize on this window of opportunity,” says Boitano.
“Experienced health care leadership, disciplined underwriting, and strong partnerships allow us to lean into this environment,” he emphasizes. “This is a long-term demographic growth story, and we want to grow with it.”
— This article was originally published in the July 2025 issue of Seniors Housing Business magazine.