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Senior Housing M&A Deals Topple to 7-Year Low Amid Health, Economic Concerns

Posted by: | Posted on: July 23, 2020

COVID-19 and its accompanying economic fallout have weakened investors’ appetite for purchasing senior housing to a record-low, according to a new report.

Only 59 senior housing and care acquisitions were publicly announced in Q2 2020, the first time deals have dropped below 60 transactions since Q2 2013, based on data collected by Irving Levin Associates Inc.’s M&A database Deal Search Online.

To be sure, acquisitions were on a downward trend in recent quarters, the senior care and healthcare M&A and finance publisher noted in its press release. In Q1 2020, 99 transactions were announced compared to 117 deals recorded in Q2 2019. The recent dips were not only attributed to COVID-19′s economic impact but the contagious virus’ affect on travel, Irving Levin Associates noted.

“Given the economic uncertainty, difficulty in securing acquisition debt and inability to actually visit senior care properties during the pandemic, it is no surprise that M&A activity was so low this quarter,” wrote Ben Swett, editor of The SeniorCare Investor, which is published by Irving Levin Associates.

Buyers also committed less money to deals. Q2 2020 spending on senior housing and care acquisitions totaled $1.35 billion, a 50% drop from Q1 2020′s $2.7 billion. While a 50% drop is bleak, the market should prepare for drearier days, Irving Levin Associates noted.

“Because of the way dealmaking also petered out from the 22 deals in April to 20 in May and then to just 17 transactions in June, the third quarter may slow even more,” Swett cautioned.

Of the acquisitions announced in Q2 2020, two deals by Welltower accounted for 60% of the quarter’s total dollar volume, Irving Levin Associates reported. Welltower sold two senior housing portfolios for roughly $500 million and $300 million. Welltower’s first transaction included seven Discovery Senior Living-operated senior living communities in Florida, which Kayne Anderson Real Estate Advisors purchased. Welltower also sold six Midwest-based senior living communities operated by Senior Star.

Though acquisitions are in a slump, Irving Levin Associates noted skilled nursing transactions jumped to 44% in Q2. Still, while senior housing comprised most transactions, Swett questioned if COVID-19 could have longstanding adverse impact on nursing and senior living communities.

“Nationally, skilled nursing facilities have so far seen more dramatic declines in census, due to the postponement of elective surgeries and the fact that they care for a frailer and more medically complex patient population,” according to prepared remarks by Swett. “But seniors housing communities have also suffered from declining occupancy, and questions about how long-term demand for these property types will change following COVID-19 still remain.”

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