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Investing in Seniors Housing

Investing in Seniors Housing. Maravilla, Santa Barbara, CA. St. Joseph's University Real Estate and Construction Forum Presentation by Anthony J. Mullen, CPA Partner, Royal Star Properties & Senior Fellow, NIC April 9 th , 2013.

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Investing in Seniors Housing

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  1. Investing in Seniors Housing

    Maravilla, Santa Barbara, CA St. Joseph's University Real Estate and Construction Forum Presentation by Anthony J. Mullen, CPA Partner, Royal Star Properties & Senior Fellow, NIC April 9th, 2013
  2. Today’s seniors housing is a mix of real estate, hospitality andcare. 2
  3. Seniors Housing Continuum 3
  4. Rents Vary by Care Segment Average Monthly Rent by Care Segment as of 2012Q4 Housing, Laundry, Meals, Socialization Source: NIC MAP® Data & Analysis Service 4
  5. Size of the Property Market Estimated National Counts as of 2012Q4 Source: NIC Research 5
  6. Market Values by Property Type Implied Market Values ($B) as of 2012Q4 Source: NIC Research 6
  7. Health Care REITs Outperform Other REITs Annualized Total Returns (%) 1-, 3-, 5- and 7-year Periods December 31, 2012 Source: NAREIT 7
  8. Seniors Housing Total Returns Outpaced NPI* Annualized Total Returns (%) 1-, 3-, 5- and 7-year Periods December 31, 2012 *NCREIF Property Index (NPI) Source: NCREIF; AEW Research 8
  9. Seniors Housing Rents Less Volatile Year-over-Year Asking Rent Growth Trends (%) 2007Q1 – 2012Q4 Source: NIC MAP® Data & Analysis Service; MBAA; REIS; STR 9
  10. Seniors Housing Occupancy Held Up Well Year-over-Year Occupancy Trends (Basis Points) 2007Q1 – 2012Q4 Source: NIC MAP® Data & Analysis Service; MBAA; REIS; STR 10
  11. Demand Drivers for Seniors Housing Strengthening demographics Rising penetration rates and product acceptance Longer life expectancy Fewer informal family care givers available Potentially more ADL needs 11
  12. Strong Demographic Growth Population Growth (%), 2013-2020 Source: U.S. Census Bureau 12
  13. Demographics Will Remain Strong for Decades Population Growth (%), 2013-2040 Source: U.S. Census Bureau 13
  14. Pace of New Supply is Now Tempered Distribution of Existing Units by Year Property Opened (%), 1985 - 2012 Source: NIC MAP® Data & Analysis Service 14
  15. Construction Activity Has Been Tempered Construction vs. Inventory (%); MAP31 2005Q4 – 2012Q4 Source: NIC MAP® Data & Analysis Service 15
  16. Moderating Supply Growth to Aid Recovery Seniors Housing Historical and Forecast Supply-Demand; MAP31 2006Q1 – 2013Q4’F Source: NIC MAP® Data & Analysis Service 16
  17. Seniors Housing Average Cap Rates Higher Rolling Four-Quarter Cap Rate/Yield (%) 2008Q1 – 2012Q4 Source: NIC MAP® Data & Analysis Service; RCA; FRED 17
  18. Obesity on the Rise Distribution of Healthy, Overweight, and Obese Adults (%), 1962 - 2008 Source: Centers for Disease Control and Prevention 18
  19. Institutional Interest in Seniors Housing High Relative Attractiveness of Property Types for New Investments by Year 2010 – 2013 (Ratings: 1 = least attractive, 5 = most attractive) Source: 2013 Plan Sponsor Survey; Kingsley Associates; Institutional Real Estate, Inc. 19
  20. Critical Issues to Accept for 1st Time Players Virtually no lender will finance an inexperienced first time buyer of an existing property without an experienced operator. No lender will finance a ground up property without an experienced development partner and an experienced management company. If you intend to be in the business long term, hire talent with 10+ years of experience and form your own management company. 20
  21. Bankruptcy Warning The average net move-in per month is substantially below apartments. Be ultra conservative and use a proven sales consultant with 15+ years experience or you will likely fail. Do not use more than 4 net move-ins per month in IL, 2.5 net per month in AL and 1.5 net per month in ALZ in your pro forma. Unlike apartments, this product must be sold in 95% of the cases…very few seniors want to move to IL and AL! 21
  22. Why Professional Selling Matters Independent Living Occupancy by Quartile; MAP31 2005Q4 – 2012Q4 Source: NIC MAP® Data & Analysis Service 22
  23. Key Takeaways Seniors housing and care’s market value is $300 billion and growing. Seniors housing private and public investment returns outperformed other commercial real estate property investments during the past seven years. Three of the 10 largest REITs are now health care REITs. Seniors housing was a resilient real estate sector during the economic recession. 23
  24. KeyTakeaways Better than average outlook for market fundamentals Solid and relatively stable investment returns Increasing presence of institutional investors A range of investment strategies that potentially also diversifya multi-asset portfolio Variety of avenues for investment available Experienced, quality operator is key to mitigating risks and achieving success through various cycles 24
  25. NIC Overview
  26. About NIC Not-for-profit data and research organization Mission – to facilitate informed investment in the seniors housing and care industry Research, Data & Analytics NIC assesses trends shaping the industry as they relate to investors, lenders, owners and operators NIC's NIC MAP® Data and Analysis Service tracks more than 12,600 properties on a quarterly basis in the 100 largest metropolitan markets. Conferences & Events NIC hosts two signature deal-making conferences annually connecting operators with capital providers Proceeds from events are used to fund data and research efforts 26
  27. NIC MAP® Data and Analysis Service Leading resource for data on independent living, assisted living, memory care, nursing care and CCRC properties. Tracks more than 12,600 properties quarterly in the 100 largest metropolitan markets Actionable market data for operators, developers, analysts, investors to: Identify new market opportunities Measure and benchmark property performance (occupancy and rents) by care and unit type Manage portfolios more efficiently Anticipate emerging market trends by monitoring sales transactions, construction activities Demonstrate performance to key stakeholders Data access via subscription or standardized reports Visit www.nicmap.org or contact John Blumer at 443-837-2406 to learn more 27

  28. Investing in Seniors Housing

    Sagewood, Phoenix, AZ National Investment Center for the Seniors Housing & Care Industry (NIC) www.nic.org | (410) 267-0504
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