BUT FUNDAMENTALS REMAIN STRONG, EXPERTS SAY
By Murray W. Wolf
Despite the credit freeze, the recession and the possible bankruptcy of the nation’s largest operator, industry experts insist that the prospects remain bright for the senior living sector.
This is because the long-term fundamentals remain strong, they say. Even short-term, some senior living operators, such as Brookdale Senior Living Inc. (NYSE: BKD) and Capital Senior Living Corp. (NYSE: CSU), bucked the recession by reporting fourth quarter (Q4) 2008 results that were better than the same quarter of 2007.
Yet 2008 and the first part of 2009 were undeniably a difficult time for many senior living firms.
Some observers expect the financial pressure to only intensify as the economic downturn drags on for perhaps another six to nine months.
On the acquisitions side, the credit crisis has clearly resulted in fewer senior living deals and rising capitalization rates. During Q4, loan volume sank to about $1 billion, far below the average for the past three years, according to the National Investment Center for the Seniors Housing & Care Industry (NIC). Meanwhile, cap rates jumped in every segment of the senior living market, ranging from 8.7 percent for independent living facilities (ILFs) to 13.1 percent for skilled nursing facilities (SNFs).
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