New Statistics: Genesis Capital Comments on Senior Housing Gains in Occupancy and Value

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The latest data on senior housing occupancy shows another increase, making this 10 straight quarters of increase. Senior housing represents an area of keen interest for investors as well. Genesis Capital facilitates off market commercial real estate transactions, and closely follows all asset types for its investors. The company takes a look at the latest senior housing data.

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This is a distinctly different market from that of general U.S. housing, still plagued by excessive inventory. There is no glut of retirement homes; indeed, with the rising number of senior citizens, demand for more of them seems almost certain.

The National Investment Center for the Seniors Housing & Care Industry (NIC). announced in an October 11th press release that occupancy of assisted-living and independent senior living centers reached a four-year high of nearly 89% for the second quarter.

The average occupancy rate for senior housing properties rose to 88.8% in the third quarter of 2012, up 20 basis points from the previous quarter and a 0.8 percentage point increase from a year ago. Occupancy has been rising consistently in the last 10 quarters and is 1.8 percentage points above its cyclical low of 87% in the first quarter of 2010. Rent paid for this housing is still rising at the rate of about 2% per year.

Investors, especially large groups like REITs, are displaying increasing interest in off market senior housing, and retirement homes. In choosing an investment in commercial real estate, these properties have become very attractive in the U.S. where a large share of the overall demographic is reaching or is already past retirement age.

In a recent landmark deal, Health Care REIT Inc., the third-largest health-care real estate investment trust by market value, agreed to acquire Sunrise Senior Living Inc. for about $845 million to expand its assisted-living communities.

This is a distinctly different market from that of general U.S. housing, still plagued by excessive inventory, says Terry Robinson, President of Genesis Capital. There is no glut of retirement homes; indeed, with the rising number of senior citizens, demand for more of them is almost certain. After a building boom in the late 1990s through early 2000s that caused an over-supply of beds, there’s been limited new construction of assisted-living and independent senior living centers in recent year. Now the excess has been absorbed, and too few facilities have been added to meet projected demand over the next several years.

Assisted-living communities represent particularly good value for investors, because demand for them continues to drive up costs. The national average daily rate for a private room in a nursing home rose 4.4% from $229 in 2010 to $239 in 2011, according to a survey by insurer Met-Life. The national average monthly base rate in an assisted living community rose 5.6% from $3,293 in 2010 to $3,477 in 2011. The national average daily rate for adult day services rose 4.5% from $67 in 2010 to $70 in 2011.

About Genesis Capital
Genesis Capital facilitates off market transactions between principals. The company sources commercial real estate (including assisted living and senior facilities) and distressed debt from sellers for opportunity buyers.

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Dan Beal
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