Property Types
Seniors Housing
Jul 02, 2009
By: Barbra Murray, Contributing Editor
While many real estate investors sit on the sidelines waiting for property prices to fall dramatically or the credit market to defrost, National Health Investors Inc. is actively enhancing its portfolio in one of the most stable property sectors in the current economic climate-- skilled nursing, a subtype of the seniors housing sector. The healthcare REIT just shelled out $55.5 million in cash for four skilled nursing facilities, all of which will be leased back to the seller and tenant, Legend Healthcare L.L.C.
With an average age of five years, the four skilled nursing facilities are located in the State of Texas and account for an aggregate 595 beds. Murfreesboro, Tenn.-based NHI's transaction with San Antonio, Tex.-headquartered Legend is a two-part arrangement, with the $39.7 million purchase of three of the properties having already transpired, and the $15.8 million acquisition of the fourth property scheduled for acquisition on or before August 1. Legend has committed to a 15-year lease of the facilities under an agreement that provides the company with the option to repurchase the four assets after seven years.
The economy's downward spiral has had an impact on seniors housing, but for the most part, this segment of the real estate market is doing well, compared to the office, retail and hospitality sectors. And20among the four subtypes of seniors housing--assisted living, dementia care, independent living and skilled nursing--skilled nursing has proven the most consistent. As per a recent report by Marcus & Millichap Real Estate Investment Services, in the grip of the economic downturn at the end of 2008, the average occupancy level for skilled nursing properties dropped a mere 90 basis points.
"In general, we believe the skilled nursing industry is currently stable, but it's not without its uncertainties," Roger R. Hopkins, NHI chief accounting officer, told CPN. "Much of the revenue at these centers is from Medicaid, and the budget difficulties many states are going through could impact Medicaid budgets."
Despite any challenges, skilled nursing facilities, in the eye of investors, still have their charm. Kindred Healthcare Inc. just announced that in a $58 million deal, it would acquire six underperforming skilled nursing properties it has been leasing from Ventas Inc., with the intention of selling the properties as soon as market values return to levels that are more desirable.
Presently it's still a buyer's market out there, if you can buy, and NHI can. "NHI has historically been a very conservative investor, so we have accumulated a significant amount of cash," Hopkins said. "We financed the Legend acquisition from available funds and we still have funds for other acquisitions." The REIT has its eye on, well, the entire country. "We expect to be very active in acquiring properties over the next year. Primarily, we’re looking for newer facilities with good track records of financial performance in good markets." Hopkins does not expect numbers on skilled nursing facility price tags to come tumbling down, but his company is keeping an eye on good opportunities that may arise as a result of the struggling market. "We're open to looking at distressed types of situations with high likelihood that those situations can be improved with new financing."
By: Barbra Murray, Contributing Editor
While many real estate investors sit on the sidelines waiting for property prices to fall dramatically or the credit market to defrost, National Health Investors Inc. is actively enhancing its portfolio in one of the most stable property sectors in the current economic climate-- skilled nursing, a subtype of the seniors housing sector. The healthcare REIT just shelled out $55.5 million in cash for four skilled nursing facilities, all of which will be leased back to the seller and tenant, Legend Healthcare L.L.C.
With an average age of five years, the four skilled nursing facilities are located in the State of Texas and account for an aggregate 595 beds. Murfreesboro, Tenn.-based NHI's transaction with San Antonio, Tex.-headquartered Legend is a two-part arrangement, with the $39.7 million purchase of three of the properties having already transpired, and the $15.8 million acquisition of the fourth property scheduled for acquisition on or before August 1. Legend has committed to a 15-year lease of the facilities under an agreement that provides the company with the option to repurchase the four assets after seven years.
The economy's downward spiral has had an impact on seniors housing, but for the most part, this segment of the real estate market is doing well, compared to the office, retail and hospitality sectors. And20among the four subtypes of seniors housing--assisted living, dementia care, independent living and skilled nursing--skilled nursing has proven the most consistent. As per a recent report by Marcus & Millichap Real Estate Investment Services, in the grip of the economic downturn at the end of 2008, the average occupancy level for skilled nursing properties dropped a mere 90 basis points.
"In general, we believe the skilled nursing industry is currently stable, but it's not without its uncertainties," Roger R. Hopkins, NHI chief accounting officer, told CPN. "Much of the revenue at these centers is from Medicaid, and the budget difficulties many states are going through could impact Medicaid budgets."
Despite any challenges, skilled nursing facilities, in the eye of investors, still have their charm. Kindred Healthcare Inc. just announced that in a $58 million deal, it would acquire six underperforming skilled nursing properties it has been leasing from Ventas Inc., with the intention of selling the properties as soon as market values return to levels that are more desirable.
Presently it's still a buyer's market out there, if you can buy, and NHI can. "NHI has historically been a very conservative investor, so we have accumulated a significant amount of cash," Hopkins said. "We financed the Legend acquisition from available funds and we still have funds for other acquisitions." The REIT has its eye on, well, the entire country. "We expect to be very active in acquiring properties over the next year. Primarily, we’re looking for newer facilities with good track records of financial performance in good markets." Hopkins does not expect numbers on skilled nursing facility price tags to come tumbling down, but his company is keeping an eye on good opportunities that may arise as a result of the struggling market. "We're open to looking at distressed types of situations with high likelihood that those situations can be improved with new financing."
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