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Two main actual property acquisitions introduced within the final two weeks are setting a sooner tempo for senior dwelling investments to return in 2025.
Earlier this week, Apollo (NYSE: APO) agreed to purchase Bridge Funding Group, a capital markets firm that owns 62 senior dwelling communities as a part of a a lot bigger actual property portfolio, in an all-stock transaction valued at roughly $1.5 billion. Every week earlier, personal world asset supervisor Barings introduced it’s buying Artemis Actual Property Companions, a longtime senior housing investor with $11 billion in actual property belongings below administration in 2024.
These acquisitions, coupled with different latest investments and plans from actual property funding trusts (REITs), point out to me that the senior dwelling transaction market – and competitors for offers – is selecting up in 2025.
Within the coming 12 months, I believe this might result in new alternatives for operators to companion with institutional capital in quite a lot of methods starting from teaming up with personal fairness and three way partnership preparations to launching household workplace funding autos.
On the identical time, the senior dwelling business has a nice want for brand spanking new investments, which I consider will spur far more exercise down the highway. An institutional investor may make a $1 billion play tomorrow – “And also you’re not even scratching the floor of the necessity for senior housing funding over the subsequent 5 years,” Lument Managing Director Justin Elshire informed me.
On this members-only SHN+ Replace, I analyze the latest Apollo and Barings transactions and provide the next takeaways:
- What latest transactions imply for the tempo of senior dwelling dealmaking in 2025
- How institutional buyers may improve competitors in senior dwelling acquisitions
- Why investor sentiment is driving a optimistic funding outlook
2025 deal tempo ‘off to a quick begin’
The previous couple of weeks have introduced bulletins of two splashy offers with important publicity to the senior dwelling business. On the identical time, REITs are gearing as much as develop their RIDEA-centered senior housing working portfolios within the 12 months forward. Each tendencies point out to me that the senior dwelling transaction market remains to be heating up in early 2025 as capital comes off the sidelines.
With its acquisition plan, Apollo, one of many largest hedge fund and personal credit score supply corporations globally, is ready to develop into a top-25 proprietor of senior dwelling properties, in accordance with the American Seniors Housing Affiliation (ASHA) 2024 listing. Charlotte, North Carolina-based funding firm Barings plans to accumulate Artemis, which in 2021 launched a well being care fund of $1 billion that included value-add acquisitions in senior housing and medical places of work.
This comes as REITs together with Welltower (NYSE: WELL) and Ventas (NYSE: VTR) have elevated their funding tempo in senior dwelling in 2025.
Within the final 45 days, Welltower closed or was below contract to shut on an funding pipeline of $2 billion throughout 27 transactions, principally in senior dwelling. Welltower additionally a month earlier launched a non-public funds administration enterprise, which is buying NorthStar Healthcare Revenue and its 40 senior dwelling communities for $900 million.
In the meantime, Ventas closed 2024 with greater than $2 billion of investments made primarily in senior housing, with an additional “line of sight” on a pipeline of $1 billion in future acquisitions. Add to that the truth that each Nationwide Well being Traders (NYSE: NHI) and LTC Properties (NYSE: LTC) have regularly sought to upsize their burgeoning SHOP segments with new lease conversions and different transactions.
These concerned with getting senior dwelling acquisitions penciled out have needed to wait on the sidelines, however that’s beginning to change, because the senior care business noticed a document variety of publicly introduced transactions, in accordance with LevinPro LTC knowledge.
“The commonality this 12 months is that each space of the nation is selecting up when it comes to deal quantity, in addition to curiosity,” Elshire informed me. “These teams which were affected person are actually positively attempting to be aggressive available in the market.”
With secure rates of interest and asset values rising early in 2025, capital markets are “slowly and selectively” returning to get offers performed, in accordance with a NIC weblog publish by Molly Odgers, who’s the vice chairman and relationship supervisor at BOK Monetary.
“Regardless of what’s to return in 2025, the power to depend on affected person and versatile partnerships between sponsors and capital suppliers continues to be a significant useful resource, Odgers wrote.
This aggressiveness follows final 12 months during which the U.S. Federal Reserve enacted the primary charge cuts since 2020 and distressed belongings together with core-plus acquisitions drove senior dwelling transactions in 2024.
In 2024, new senior dwelling building fell to ranges not seen since 2009. During the last 18 to 24 months, senior dwelling M&A has been slower on account of cussed rates of interest, cap charges and a disconnect between patrons and sellers.
However institutional buyers haven’t been “totally sidelined” since 2023, as Senior Residing Funding Brokerage (SLIB) Government Vice President Dave Balow informed me. However acquisition standards for institutional buyers grew to become extra strict on the identical time.
“Numerous these buyers had plenty of fairness that had been pent up, and now they want to deploy it now that the capital markets are much less risky,” Balow informed me.
As I stay up for the rest of 2025, I see a number of indications that extra transactions are on the horizon, together with the truth that funding in industrial actual property typically could possibly be on the upswing.
A number of the identical tendencies which are defining the senior housing market are at play in actual property throughout different asset sorts in world markets. As an example, “provide is constrained, and rates of interest have peaked,” as Robert Harley identified in his Monetary Assessment piece on why industrial property is at a turning level. Related analyses have come from numerous different sources, together with the City Land Institute. Even hard-hit actual property markets like New York Metropolis are turning round, audio system stated at a ULI occasion earlier this month.
This broader pattern is noteworthy in mild of the latest offers involving senior housing. Take the Bridge acquisition by Apollo. Senior housing represents solely about 6% of Bridge’s whole fee-earning belongings below administration. With $22.3 billion in fee-earning AUM in This autumn 2024, that interprets to about $1.34 billion within the senior housing portfolio.
This clearly makes Bridge a significant participant within the sector, but seniors housing is barely a sliver of the Apollo transaction; by comparability 17% of Bridge’s fee-earning AUM is in multifamily whereas 10% is in workforce and reasonably priced housing.
Apollo has not replied to my requests for remark, so I don’t have info from the agency about how senior housing performed into the calculus to accumulate Bridge. But it surely’s protected to say that Apollo sees worth within the senior dwelling market and is definitely no stranger to it. In 2018, Apollo acquired a portfolio of twenty-two Brookdale Senior Residing (NYSE: BKD) properties, and the agency reportedly noticed this portfolio as a launchpad for additional funding in private-pay senior dwelling.
Artemis likewise has a portfolio of various belongings throughout the capital stack, together with in residential, industrial, hospitality and different kinds of actual property. However the agency has experience in senior housing, together with by means of a 2018 funding in Silverado. Increasing “new merchandise in different sectors together with healthcare” is among the many deal’s advantages for Barings, a Feb. 18 PERE article acknowledged.
And Barings’ management anticipates the deal will set the agency as much as make the most of the approaching actual property thaw, whereas additionally noting some sources of threat.
“We’re cautiously optimistic about the true property market in 2025,” Barings’ head of U.S. and European actual property informed PERE. “We discover this to be an general favorable situation for discerning buyers. On the chance facet, tariffs, inflation and geopolitical uncertainty bear watching, however general we’re optimistic.”
So, whereas senior housing has a compelling story for buyers and is probably going to attract additional capital in 2025, the sector additionally may achieve entry to large investor sources as a part of some of these massive transactions involving numerous kinds of property, past senior dwelling. One query going ahead is the extent to which main gamers like Apollo and Barings will pursue senior dwelling particularly versus different asset sorts, however there’s little question concerning the potential for some main offers, accelerated funding pipelines and elevated competitors in senior dwelling M&A.
On the identical time, I don’t assume that the senior dwelling transaction market has totally thawed as acquisition standards has “tightened up” for giant institutional buyers, as Balow informed me, making offers market-specific and depending on previous relationships or confirmed working efficiency.
Competitors intensifies in 2025
The senior dwelling business is on the cusp of years-long demand development within the type of the child boomers, and I believe that may imply the competitors for senior dwelling acquisitions will intensify in 2025.
A part of that’s as a result of easy proven fact that extra buyers see senior dwelling in a optimistic mild. Latest knowledge from JLL Capital Markets confirmed a 24% improve in optimistic investor sentiment from 2024, as 78% of buyers polled by JLL stated they plan to extend their senior dwelling portfolios in 2025. That dovetails with a latest outlook survey by Senior Housing Information and Lument, during which half of respondents stated their corporations deliberate to purchase senior dwelling belongings in 2025.
Lument Head of M&A Laca Wong-Hammond factors out that “long-term capital managers corresponding to pension and insurance coverage funds” stay well-capitalized and “can solely spend money on optimized Class-A belongings,” which Wong-Hammond stated, will maintain valuations secure.
“Shoppers on this realm have a selection in transaction timing and are differentiated among the many ocean of distressed offers,” Wong-Hammond wrote.
Clearly, extra potential suitors for senior dwelling belongings and portfolios imply extra competitors for these offers. The latest acquisitions by Apollo and Barings solely add gas to the fireplace for elevated competitors, permitting for brokers like Balow to “push values larger.”
Prior to now, institutional buyers noticed new development by means of growth, however as growth has remained just about stagnant, that’s shifted the eye in direction of acquisition alternatives, Balow stated.
“Whereas in-place money circulation remains to be the principle driver of institutional curiosity ranges, we’re seeing increasingly more value-add offers for Class A belongings which are getting important institutional curiosity,” Balow added.
Whereas these massive establishments search to fireside away dry powder accrued during the last three years, the broader lending surroundings continues to make some of these offers market-specific and depending on a robust working companion on account of still-elevated rates of interest and capital prices, together with tightened underwriting requirements.
As institutional buyers search value-add acquisitions in 2025, I believe that might result in “disruptors” rising within the senior dwelling working area. Specifically, the present interval is a chance to construct new working fashions that may additional drive competitors, True Connections Vice President of Advertising and marketing Geoff Duncan informed me.
“Extra affect from institutional buyers will push senior housing operators to proceed to innovate with their operational processes,” Duncan added.
However that additionally means the strain is on for operators as buyers seek for offers with extra scrutiny than prior to now as operators should present extra monetary reporting info than prior to now and be extra clear. I see similarities of operators partnering with institutional buyers in aligning pursuits and bettering transparency within the title to enhance margin and the way REITs have labored to type extra RIDEA-based relationships with operators.
Senior dwelling suppliers have taken steps lately to modernize their working fashions, from integrating expertise to enhance workers and resident engagement to bettering monetary reporting capabilities to draw new buyers.
“Operators which have invested in these issues have seen extra buyers as a result of they’re in a position to report correct knowledge each day, versus saying, ‘I’ll have to attend to get the month-end experiences,’” Elshire informed me.
To me, this reveals that operators should proceed to drill down on internet working revenue outcomes, shifting past in search of occupancy positive aspects and honing their working fashions in the event that they’d prefer to companion with institutional buyers sooner or later.
I believe it will result in senior dwelling suppliers to additional enhance their working fashions with added monetary reporting capabilities, and result in a higher sophistication required to seek out future capital suitors.
As VIUM Capital Managing Director Grant Blosser identified, the senior housing sector being included as a separate asset class by the Nationwide Council of Actual Property Funding Fiduciaries (NCREIF) will solely elevate the visibility and assist deliver extra curiosity to the business.
Within the fourth quarter of final 12 months, senior housing led NCREIF’s institutional property returns knowledge with a quarterly return of two.07%, in accordance with NCREIF.
“The very last thing a [private equity] supervisor desires is to be under-allocated to an index that finally ends up performing effectively,” Blosser informed me. “That’s a troublesome dialog to have together with your buyers.”
In the end, higher competitors in senior dwelling will solely drive the evolution of the sector and assist profitable operators rise to the highest as low growth to favorable demographic tendencies ought to give buyers confidence this 12 months and past.
