Senior Housing & Care - Market Insight 2018 Q1 Review - CBRE
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Senior Housing & Care 2018
Q1
Market Insight Review
IN THIS REPORT Senior Housing Market Fundamentals 5 Capitalization Rates, Transaction Activity & Underwriting 17 Structured Debt Options 24 About CBRE National Senior Housing 26
NATIONAL SENIOR HOUSING PRIMARY CONTACTS
LISA WIDMIER MATTHEW WHITLOCK ARON WILL DEBORAH STREET
Executive Vice President Vice Chairman Vice Chairman Vice President
Institutional Properties Institutional Properties Institutional Properties Institutional Properties
National Senior Housing National Senior Housing National Senior Housing National Senior Housing
Capital Advisors, Inc. Debt & Structured Finance Debt & Structured Finance CBRE | Capital Markets
Investment Banking CBRE | Capital Markets CBRE | Capital Markets T +1 760 438 8559
Member FINRA/SIPC T +1 978 282 0024 T +1 713 787 1965 M +1 760 715 2076
CBRE | Capital Markets
T +1 858 729 9890
M +1 858 952 4743
NATIONAL SENIOR HOUSING TEAM
MATT KURONEN ADAM MINCBERG AUSTIN SACCO ASHAY SHAH TIM ROOT HENRY MCARDLE
Vice President Vice President Vice President Transaction Manager Senior Production Analyst Senior Financial Analyst
Institutional Properties Institutional Properties Institutional Properties Institutional Properties Institutional Properties Institutional Properties
National Senior Housing National Senior Housing National Senior Housing National Senior Housing National Senior Housing National Senior Housing
Debt & Structured Finance Debt & Structured Finance Debt & Structured Finance CBRE | Capital Markets Debt & Structured Finance CBRE | Capital Markets
KENNETH QUACH BRANDON WILLIAMS SANDY AGUILA JUDITH BRIGGS NATALIA MANNING
Financial Analyst Production Analyst Client Services Coordinator Client Services Coordinator Client Services Coordinator
Institutional Properties Institutional Properties Graphic Designer Institutional Properties Institutional Properties
National Senior Housing National Senior Housing Institutional Properties National Senior Housing National Senior Housing
CBRE | Capital Markets Debt & Structured Finance National Senior Housing CBRE | Capital Markets Debt & Structured Finance
CBRE | Capital Markets
VERTICAL CORPORATE SUPPORT SOURCE
CBRE National Senior Housing
5780 Fleet Street, Suite 100, Carlsbad, CA 92008
Please visit our website at
cbre.com/nationalseniorhousing
MITCHELL KIFFE
Senior Managing Director
National Senior Housing
Debt & Structured Finance
CBRE | Please visit our website at cbre.com/nationalseniorhousing 3
CBRE NATIONAL SENIOR HOUSING REPRESENTATIVE INVESTMENT
PROPERTY TRANSACTIONS - 2015 FORWARD
Today’s complex and constant changing market environments require special solutions. CBRE SH Team Members
consistently achieve the highest sale price/best debt terms in the industry for their Clients.
Sunwest Portfolio Vintage Portfolio (19) The Maestro Portfolio
$1.29 billion $1.15 billion $921,000,000
Nationa Portfolio Northern and Southern CA Alberta and Quebec,
11,096 IL/AL/MC units/ (18) and Western WA (1) Canada
beds 2,590 IL/AL/MC units 8,206 IL/AL/MC units/beds
Client was The Blackstone Client was Vintage Senior Client was Maestro Funds
Group Living and their private
investors
The Fountains Portfolio Brightview I Sunwest Managed
$640.0 million $498,500,000 Portfolio
National Portfolio National Portfolio (5 States) $364,250,000
(11 states) 1,584 IL/AL/MC units/beds National Portfolio (11
3,637 IL/AL/MC and Entry Client was Affiliate of states)
Fee CCRC units/beds Prudential Real Estate 3,054 IL/AL/MC and
Client was Fountains Senior Investors Cottages
Living Holdings, LLC Client was Sunwest
Brightview II The Garden Empire Portfolio Mid-Atlantic Portfolio
$363,500,000 $307,500,000 $186.2 million
National Portfolio (3 States) NJ and NY Greater Baltimore,
1,117 IL/AL/MC units/beds 933 IL/AL/MC units/beds Maryland (5) and Greater
Client was an Affiliate of Client was an Affiliate of The Washington, D.C. (2)
The Shelter Group Carlyle Group 526 AL/MC units
Client was an affiliate of
Harrison Street
CCRC Portfolio Five Allegro Communities Lang Nelson Portfolio
$186,500,000 $172,500,000 JV Recapitalization
Dallas, TX FL and KY $127,000,000
1,104 units 705 IL/AL/MC/NC units/beds Greater Minneapolis, MN
Client was Life Care Client was Almanac Realty 1,166 IL/AL units/beds
Services Client was Harrison Street
Real Estate Capital
The Meridian Portfolio MBK Two California Three Arbor Terrace
$110,500,000 Communities Communities
CO and TX $104,500,000 $101,665,000
1,042 IL/NC units/beds Santa Clarita and Rocklin, CA Greater Atlanta, GA &
Client was an Affiliate of 293 IL/AL/MC units Greater Washington,
ING Real Client was MBK Senior Living D.C.
Estate Investment 310 IL/AL/MC units
Management Client was Affiliate of
Capitol Seniors Housing
Texas Portfolio Vintage Westwood The Wellington at
Price is Confidential $96,000,000 Hershey’s Mill
Greater Houston, TX Los Angeles, CA $95,000,000
431 AL/MC units 226 IL units West Chester, PA
Client is Confidential Client was Vintage 297 IL/AL/SNF units
Senior Living and their Client was First
private investors Somerset
Four IL/AL/MC IL/AL/MC Renaissance on
Communities Communities Peachtree
$80,400,000 Price is Confidential $78,600,000
Western WA The Woodlands, TX Atlanta, GA
320 IL/AL/MC units/beds (Greater Houston) 229 IL/AL units/beds
Client was AEW Capital 207 IL/AL/MC units Client was The Carlyle
Management Client was Harrison Group and Formation
Street/Bridgewood JV Development
4 CBRE | Please visit our website at cbre.com/nationalseniorhousing
5 Senior Housing Market
Fundamentals
The senior housing market continues to perform from institutional investors, which have accounted
well and to attract substantial global investor for approximately 30.0% of year to date transaction
interest. Senior housing demand will continue to volume. By comparison, institutional investment
be driven by several factors including the aging accounted for only 11.0% of total senior housing
of baby boomers, a stable housing market and transaction volume in 2015. Despite the recent uptick
an attractive spread between lending rates and in activity by public buyers, private equity remains
capitalization rates. Demand growth is also fueled extremely active in the senior housing investment
by seniors with financial capacity who are becoming community, accounting for 27.0% of year to date
increasingly educated about the benefits of living transaction volume, in-line with historical private
in senior housing. Average stabilized occupancy is equity investment share.
steady and strong (approximately 90.1% during the
past four quarters across primary and secondary Combined senior housing and care transaction
markets) and absorption of new senior housing volume through year-end 2017 is reported as
supply remains healthy. $15.9 billion in publicly announced transactions, an
increase over 2016 ($14.5 billion). Combined senior
The senior housing industry has proven itself as not housing and care transaction volume through May
only a defensive investment during an economic 29, 2018 totals $3.7 billion with transaction volume
downturn, but also an income and capital return totaling $13.5 billion for the prior four quarters (Q2
leader across the commercial real estate investment 2017 - Q1 2018), on par with prior years.(1) (2)
spectrum. As of Q1 2018, the Property Index
Performance Data provided by the National Council
of Real Estate Investment Fiduciaries (NCREIF)
reports a total return on investment (ROI) for senior
housing of 14.88% and 12.79% for the prior five
and one-year periods, respectively. These returns
are considerably higher than those of other major
real estate property types. The total return reported
for multi-family for the prior five years is 8.99%,
considerably lower than the return reported by
senior housing for this same period.
According to information compiled by Real Capital
Analytics, the composition of senior housing and
care buyers continued to show a dynamic shift
during the first half of 2018. Historically, publicly-
traded buyers (mainly REITs) have represented
a majority of the transaction volume, although
between 2016 and 2017 the public buyers were Virginia Widmier and Matilda Looney
less active, many devoting significant resources to
portfolio repositioning efforts through coordinated
dispositions. However, during the first half of
2018, publicly-traded buyers represented 34.0%
of transaction volume, the largest share of the total
year to date transaction volume. Additionally, senior
housing is continuing to attract substantial interest Matilda Looney Celebrating 100th Birthday
CBRE | Please visit our website at cbre.com/nationalseniorhousing 5
SENIOR HOUSING DEMAND IS DRIVEN BY DEMOGRAPHIC DEMAND
Trends
The baby boomers (post-World War II babies) began per 100,000 standard population. Additionally, age-
turning 65 in 2011 and by 2029, the remainder will adjusted death rates decreased significantly between
also reach age 65 and account for more than 20 2013 and 2014 for five of the 10 leading causes.(5)
percent of the total United States population. By 2050,
the 65-plus age group is estimated to equal 88.0 Driving this increased life expectancy, and
million, nearly double its current population (49.2 consequentially average population age, is the
million). Additionally, by 2056, the 65-plus age group advancement in public health strategy and medical
is estimated to be larger than the population under age treatment. Life expectancy in the United States has
18. The projected growth in this age group will present increased by approximately 30 years over the past
many challenges to policy makers and programs by century, primarily due to the reduction of acute illness
having a significant impact on families, businesses, threats. However, an unforeseen consequence of longer
healthcare providers and, most notably, the demand life expectancy has been the increased prevalence of
for senior housing.(3) heart disease, cancer and other chronic diseases as the
leading causes of death. As Americans age during the
One of the primary drivers in trends for the aging next several decades, the elderly population will require
population is mortality rates. Survivorship rates have a larger number of formally trained, professional
shown consistent improvement for many decades. In caregivers as a direct effect of these chronic diseases,
the United States in 1972, the average life expectancy which often affect independence and mobility.(3)
of a 65-year-old was 15.2 years. By 2015, this metric
increased by 5.2 years to approximately 20.4 years. Moreover, the problems facing the United States aging
Additionally, it is estimated that about one out of every population can be witnessed as a global phenomenon.
four 65-year-olds will live to be 90 years old, with one Fifty countries had a higher proportion of people aged
of every 10 expected to live past 95 years of age.(4) 65-plus than the United States in 2010. This number is
According to NCHS Data Brief No. 229, life expectancy expected to increase to approximately 98 countries by
at birth for the United States population reached a 2050.(6)
record high of 78.8 years in 2012, with the age-adjusted
death rate for the United States having decreased
1.0% between 2013 and 2014 to a record low of 725
Number of People Age 65 and Over and 85 and Over (millions)
98.2
100 88.0
82.3
Population (millions)
80 74.1
56.4
60
40.3
40 19.7
14.6 19.0
20 5.5 6.7 9.1
0
2010A 2020F 2030F 2040F 2050F 2060F
Population 65 + Population 85 +
Chart Source: U.S. Census Bureau; 2017 National Population Projects: Summary Table 3: Projections of the Population by Sex and Age for the United
States: 2017 to 2060. Released March 2018 historical data per census data.
Note: “A” indicates actuals based on 2010 Census and “F” indicates forecasted population estimates released March 2018.
6 CBRE | Please visit our website at cbre.com/nationalseniorhousing
SENIOR HOUSING DEMAND IS DRIVEN BY DEMOGRAPHIC DEMAND
U.S. Population Estimates Age 75-Plus
60 14.0%
50 12.0%
% of Total Population
10.0%
75-Plus Population (millions)
40
8.0%
30
6.0%
20
4.0%
10 2.0%
0 0.0%
Population 75+ % of Total Population
Chart Source: U.S. Census Bureau; release date: March 2018 and U.S. Census Bureau, Statistical Abstract of the United States: 2012.
Note: “A” indicates actuals based on Census data and “F” indicates forecasted population estimates released March 2018.
A Multi-Trillion Dollar Industry
In the United States, annual expenditures on healthcare services are projected to total nearly $3.7 trillion in 2018.
Healthcare is one of the largest line items in Federal and State government spending. Healthcare spending is
estimated to grow at an average of 5.5% per year from 2018 through 2025 (4.6% on a per capita basis). Further,
during this same period, healthcare spending is estimated to grow 1.0% faster than GDP per year. As a result,
the healthcare portion of GDP is expected to rise from 18.0% in 2017 to 19.4% by 2025.(7)
$5,091
$5,370
National Health Expenditures (Billions)
$4,819
$6,000
$4,562
$4,322
$4,091
$3,868
$3,675
$5,000
$3,489
$3,337
$3,201
$3,026
$2,879
$2,797
$2,689
$4,000
$3,000
$2,000
$1,000
$0
Source: Centers for Medicare & Medicaid Services, actuals published as of 2/2018. The projections incorporate estimates of GDP and spending as of May 2017.
National Health Expenditures Per Capita
$15,386
$20,000
$14,671
$14,007
$13,378
$12,787
$12,248
$11,685
$11,205
$10,736
$10,364
$10,003
$15,000
$9,516
$9,111
$8,937
$8,647
$10,000
$5,000
$0
Source: Centers for Medicare & Medicaid Services, actuals published as of 2/2018. The projections incorporate estimates of GDP and spending as of May 2017.
CBRE | Please visit our website at cbre.com/nationalseniorhousing 7
SENIOR HOUSING PROPERTY TYPES
Senior housing can be classified according to the level of healthcare services provided.
Multi-Family Congregate Care Healthcare
Senior Independent Assisted Living Memory Care Nursing Care
Apartments Living
Building Facility Similar to Similar to Most units do not Units do not have Units resemble hotel
apartments but may apartments but has have a full kitchen, a full kitchen, only rooms and many
have special access commercial kitchen, only dorm room dorm room size rooms have shared
and common area dining room and size refrigerator and refrigerator and occupancy.
designs. additional common microwave. Many microwave. Many
area amenities. units are studios. units are studios.
Ideal Building Size 60 to 200 Units 100 to 150 Units 80+ Units 24 to 36 Units 120 Beds (70 Units)
Resident Entry Age (1) 55 to 75 75 to 84 (avg. 80.6) 75 to 85 (avg. 87) Included with 80 to 90
assisted living
Percent Revenue 0% 45% 65% Included with 75%
from Services (2) assisted living
Typical Services Organized social Restaurant-style Independent Assisted living Assisted living
Provided activities. dining, social living services plus services plus special services plus
activities, weekly assistance with behavior/memory administration of
housekeeping, bathing, eating and care, secured access medications. 24
laundry and dressing; medication only. hour care by RA, RN
transportation. reminders (no licensed personnel.
administration of
medicine).
Average Length of 5 to 12 Years 2.0 to 3.6 Years 1.2 to 3.0 Years 1.3 to 2.7 Years 30 Days to 2 Years
Stay(3)
Average Monthly
Rent (4) $3,263 $4,949 $6,593 $9,836
Trailing 50 Quarter
Avg. Stabilized
Occupancy / Current 90.5% / 91.4% 90.3% / 88.9% 90.1% / 86.5% 88.8% / 86.7%
Avg. Stabilized
Occupancy (4)
Total Units/Beds in 270,926 240,496 78,965 586,246
Inventory (4)
Number of Units/
Beds Under 14,426 17,718 8,436 4,915
Construction (4)
Construction vs.
Inventory (4) 5.3% 7.4% 10.7% 0.8%
Penetration Rate of 6.0% IL/4.3% CCRC 5.0% Included with 10.6%
75+ Households (4) (5) assisted living
Notes:
(1) IL Data-”Retirement Living Communities: How They Are Changing the Way People Retire,” Senior Homes, accessed October 15, 2015 http://www.seniorhomes.
com/p/retirement-living-communities/. AL Data- Centers for Disease Control and Prevention, Residents Living in Residential Care Facilities: United States, 2010
Christine Caffrey, Manisha Sengupta, Eunice Park-Lee, Abigail Moss, and Lauren Harris-Kojetin, NCHS data brief, no 91. Hyattsville, MD: National Center for
Health Statistics. 2012., http://www.cdc.gov/nchs/data/databriefs/db91.pdf (accessed October 15, 2015).
(2) “A Case for Investment: Seniors Housing” NIC MAP® Data Service (September 2009).
(3) “The State of Seniors Housing 2016.” (Table 8.2) ASHA American Seniors Housing Association (2016).
(4) NIC MAP® Data Service; Primary Market Data.
(5) Ibid. Note: Penetration rate equals inventory divided by the number of households headed by an individual at least 75 years old
8 CBRE | Please visit our website at cbre.com/nationalseniorhousing
SENIOR HOUSING SUPPLY
Number Communities Total Units/Beds
Number Communities Continuing Care Total Units/Beds
Retirement Majority Nursing
Majority Nursing Care
Communities Continuing Care
Care 44.5%
7.7% Retirement
43.2% Majority
Communities
Independent
20.0%
Living 11.0%
Majority
Independent
Living
12.7%
Majority Assisted
Living
38.1%
Majority Assisted
Living
Source: NIC MAP® Data Service. 22.8%
Community Location in the NIC MAP Metro Markets
Total No. of Total No. of Location Mix (Units/Beds)
Region Communities Units/Beds
Northeast 3,266 472,652 West, Northeast,
Southeast 3,483 431,494 19.2% 24.8%
North Central 3,113 382,817
South Central 2,163 252,143
South
West 3,278 365,078 Central,
Top 100 Metro Market Totals 15,303 1,904,184 13.2%
Note:
Northeast – CT, DE, ME, MA, NH, NJ, NY, PA, RI, VT Southeast,
Southeast – AL, DC, FL, GA, KY, MD, NC, SC, TN, VA, WV 22.7%
North Central – IA, IL, IN, MI, MN, NE, ND, OH, SD, WI North Central,
South Central – AR, KS, LA, OK, TX, MO, MS 20.1%
West – AK, AZ, CA, CO, HI, ID, MT, NM, NV, OR, UT, WA, WY
Source: NIC MAP® Data Service.
Existing Senior Housing Supply Some Compelling Math
There are approximately 23,350 professionally managed • A 5.9% increase in the number of seniors
senior housing and nursing care communities (with 25 or more is more than the total number of the entire
units/beds) in the United States, representing 3.01 million existing supply of professionally managed
professionally managed units/beds nationally. The combined senior housing beds/units!(8)(9)
projected total value is $469.2 billion based on values reported
in The Senior Care Acquisition Report for 2017 transactions and • A 1.0% increase in the penetration rate
NIC MAP’s industry size projections. The current estimated value would necessitate a 17.0% increase in the
is more than twice the value reported as of 2009 ($222.8).(2)(8) professionally managed senior housing
supply to meet this incremental demand.(8)(9)
CBRE | Please visit our website at cbre.com/nationalseniorhousing 9
SENIOR HOUSING CONSTRUCTION ACTIVITY
With a Q1 2018 year-over-year growth rate of 2.2%, inventory growth is below the 30-year
average annual growth rate of 4.0%.(8)
The senior housing pipeline (construction versus inventory) is 6.2% as of Q1 2018. New senior housing construction
activity peaked at 11,368 units/beds during the second quarter of 2015. There were reportedly 6,330 units/beds
of new construction starts in the first quarter of 2018, which is just over half of what was reported during this peak.
(8)
Senior Housing Inventory Growth
10.00%
(All Markets)
9.00%
8.00% Inventory Growth %
at 30 year lows
7.00%
Growth in Inventory (%)
6.00%
Average = 4.0%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
Source: NIC MAP® Data Service.
New Senior Housing Construction
New Construction Started by Quarter
8,000
7,000
6,000
5,000
Units
4,000
3,000
2,000
1,000
0
Majority Independent Living Majority Assited Living Majority Nursing Care
Source: NIC MAP® Data Service.
10 CBRE | Please visit our website at cbre.com/nationalseniorhousingSENIOR HOUSING OCCUPANCY RATES
93.0%
Historical occupancy for seasoned 92.0%
communities (those open 24 months or
longer) is detailed in the graph to the right. 91.0%
Stabilized Occupancy (%)
Independent living occupancy (91.4%) led the
90.0%
pack followed by the assisted living (88.9%)
and memory care segments (86.5%). Nursing 89.0%
care occupancy averaged 86.7% in Q1 2018,
which is consistent with the prior four-quarter 88.0%
average (86.5%).
87.0%
86.0%
85.0%
Source: NIC MAP® Data Service. Independent Living Assisted Living
Memory Care Nursing Care
Occupancy versus Average Monthly Rent “AMR” Growth
Average stabilized occupancy and rent growth for the primary market benchmarks are detailed by care segment in the
graphs below. Aggregated senior housing annual rent growth was 2.2% in Q1 2018. Nursing care reported average
annual rent growth of 2.3% in Q1 2018.
Independent Living Assisted Living
4.0% 4.0%
94% 94%
3.5% 3.5%
92% 92%
3.0% 3.0%
Y-t-Y Growth (%)
Y-t-Y Growth (%)
90%
Occupancy (%)
90%
Occupancy (%)
2.5% 2.5%
88% 2.0% 88% 2.0%
86% 1.5% 86% 1.5%
84% 1.0% 84% 1.0%
82% 0.5% 82% 0.5%
80% 0.0% 80% 0.0%
Stabilized Avg Occupancy Avg AMR Y-t-Y Growth Stabilized Avg Occupancy Avg AMR Y-t-Y Growth
Memory Care Nursing Care
4.0% 4.0%
94% 94%
3.5% 3.5%
92% 92%
3.0% 3.0%
Y-t-Y Growth (%)
Y-t-Y Growth (%)
90%
Occupancy (%)
Occupancy (%)
2.5% 90%
2.5%
88% 2.0% 88% 2.0%
86% 1.5% 86% 1.5%
84% 1.0% 84% 1.0%
82% 0.5% 82% 0.5%
80% 0.0% 80% 0.0%
Stabilized Avg Occupancy Avg AMR Y-t-Y Growth Stabilized Avg Occupancy Avg ADR Y-t-Y Growth
Source: NIC MAP® Data Service.
CBRE | Please visit our website at cbre.com/nationalseniorhousing 11HOW DOES OCCUPANCY STACK UP WITH OTHER PROPERTY TYPES?
Senior housing occupancy has been relatively consistent and never significantly below 90% – even during the
economic downturn in 2008.
Comparison of Occupancy Senior Housing vs. Other Commercial Property Types
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
2011 2012 2013 2014 2015 2016 2017
Sources: Seniors Housing source is NIC MAP® Data Service; Retail, Office and Multi-family source is Mortgage Bankers Association Q4 2017 Quarterly Data
Book; HotelNewsNow Newswire December Releases 2011-2017.
Office Occupancy
Retail Occupancy
Multi-family Occupancy
Hotel Occupancy
Seniors Housing Occupancy
12 CBRE | Please visit our website at cbre.com/nationalseniorhousingSENIOR HOUSING MANAGEMENT COMPANIES
(Independent Living “IL”/Assisted Living “AL”)
RANK COMPANY OWNERSHIP UNITS/BEDS PROPERTIES
MANAGED
1 Brookdale Public → BKD 102,055 1,048
2 Holiday Retirement Private 37,523 306
3 LCS Private 34,400 141
4 Sunrise Senior Living LLC Public → SRZ 27,125 260
5 Five Star Senior Living Public → FVE 24,476 215
6 Erickson Living Private 21,705 18
7 Senior Lifestyle Corporation Private 19,905 194
8 Atria Senior Living Private 19,541 166
9 Capital Senior Living Public → CSU 12,591 129
10 Enlivant Private 10,794 231
Source: “ASHA 50 Report” ASHA: American Seniors Housing Association, (as of June 1, 2017).
• This is a highly fragmented (“cottage industry”) market.
• The top 50 senior housing providers control 33.0% of the IL/AL/MC total supply. (10)
• The average size of the top 50 providers is only 10,226 units per provider compared to an average of 31,012
units for the top 10.
• Only four providers in the Top 50 are publicly traded companies.
CBRE | Please visit our website at cbre.com/nationalseniorhousing 13NURSING CARE MANAGEMENT COMPANIES
(“SNF” or “NC”)
RANK COMPANY OWNERSHIP BEDS
MANAGED FACILITIES
1 Genesis HealthCare Corp Public → GEN 56,575 512
2 HCR ManorCare Private 34,539 255
3 Golden Living Private 30,267 295
4 Life Care Centers of America Private 28,414 213
5 SavaSeniorCare Private 24,154 200
6 Consulate Health Care Private 22,059 210
7 Signature HealthCARE Private 14,157 113
8 The Ensign Group Public → ENSG 13,205 124
9 Extendicare Health Services Public → EXE 12,086 90
10 Kindred Healthcare Public → KND 11,535 90
Source: Provider Magazine; June 2016 issue. Rankings are based on 12/31/15 bed counts.
• Also a highly fragmented (“cottage industry”) market.
• Nursing care providers provide an array of services and specialty care remains a strong trend for the top
50 providers. Memory care is at the top of the list (47 providers), followed closely by assisted living (43) and
outpatient therapy (42).
• The top 50 nursing care providers control 29.8% of the total nursing care supply.(11)(12)
• The average size of the top 50 providers is only 8,710 beds per provider compared to 24,699 beds for the top
ten providers.(11)(12)
• Only eight providers in the top 50 are publicly traded companies.
14 CBRE | Please visit our website at cbre.com/nationalseniorhousingPUBLICLY TRADED SENIOR HOUSING COMPANIES
The senior housing/healthcare publicly traded providers’ total market capitalization is approximately $6.36 billion
as of June 11, 2018. This is up from $5.20 billion on September 19, 2017.
Public Pricing
52-Week Range
Close 200-Day
Trailing P/E 52-Week Market Cap
Company Ticker Stock Price Moving
Ratio (1) (2) Change (1) High (1) Low (1) 6/11/18
6/11/18 Average (1)
Independent/Assisted
Living:
Brookdale Senior Living BKD 9.05 N/A 8.35 -37.75% 15.66 6.28 1.70B
Capital Senior Living CSU 11.09 N/A 12.06 -26.06% 16.72 9.15 345.26M
Five Star Quality Care FVE 1.55 N/A 1.39 -11.76% 1.85 1.05 78.33M
Total IL/AL $ 2.12B
Nursing Care:
Adcare Health Systems ADK 0.2356 N/A 0.2675 -77.01% 1.14 0.16 4.62M
Diversicare Healthcare DVCR 7 N/A 8.36 -32.31% 12.25 6.45 44.19M
Ensign Group ENSG 37.23 48.35 27.17 84.91% 38.45 18.75 1.94M
Kindred Healthcare KND 9 N/A 9 -15.57% 11.9 5.5 821.35M
National Healthcare
NHC 69.62 18.87 62.57 -4.99% 74.8 57 1.06B
Corp.
Genesis Healthcare GEN 2.3 N/A 1.3 27.93% 2.5 0.6 366.73M
Total NC $ 4.24B
Total Providers $ 6.36B
Notes:
(1) Data pulled by Yahoo! Finance who pulls from multiple sources or calculates internally. Data is for 52-weeks ending 6/11/2018.
(2) Trailing twelve months intraday P/E Ratio.
(3) Market Cap is an intraday value derived by taking outstanding shares multiplied by the current share price. Shares outstanding is taken from the most recently filed
quarterly or annual report and Market Cap is calculated using shares outstanding. (4)
Enterprise Value is a market-based measure of a company’s value and is generally equal to Market Cap plus debt minus total cash and cash equivalents.
Chart Source: Yahoo! Finance
CBRE | Please visit our website at cbre.com/nationalseniorhousing 15PUBLICLY TRADED SENIOR HOUSING DOMINATED REITs
The senior housing/healthcare REIT total market capitalization is $82.48 billion as of June 11, 2018. This is down
slightly as compared to $88.76 billion reported as of September 19, 2017.
REIT Pricing
52-Week Range
Close Trailing
Annual Dividend 52-Week Market Cap
Company Ticker Stock Price Dividend Date (1) Change (1) High (1) Low (1) 6/11/2018 (2)
6/11/2018 Yield (1)
REITs
CareTrust REIT CTRE 16.58 4.44% 13-Apr-18 -11.84% 19.86 12.73 1.26B
HCP, Inc. HCP 24.18 6.08% 22-May-18 -23.02% 33.67 21.48 11.52B
LTC Properties LTC 41.63 5.48% 29-Jun-18 -16.39% 52.85 34.46 1.65B
MedEquities Realty Trust (4) MRT 10.25 8.20% 5-Jun-18 -13.80% 13.06 9.67 326.84M
National Health Investors NHI 74.03 5.15% 10-Aug-18 -4.96% 81.6 62.71 3.07B
New Senior Investment
SNR 7.47 14.09% 22-Jun-18 -24.85% 10.57 6.77 613.65M
Group
Omega Healthcare
OHI 30.81 8.43% 15-May-18 -6.27% 34.84 24.9 6.39B
Investors
Quality Care Properties(5) QCP 21.22 N/A N/A 19.98% 22.91 12.25 2.00B
Sabra Health Care REIT (6) SBRA 20.89 8.25% 31-May-18 -9.85% 25.31 15.78 3.72B
Senior Housing Properties
SNH 17.59 8.87% 17-May-18 -17.80% 22.01 14.86 4.18B
Trust
Ventas VTR 54.91 5.68% 12-Jul-18 -19.55% 72.36 46.55 19.70B
Welltower (7) HCN 58.3 6.00% 23-May-18 39893.11% 60.99 0.11 21.69B
Total REITs $76.12B
Providers & REITs Estimated Market Capitalization Total: $82.48B
Notes:
(1) Data pulled by Yahoo! Finance who pulls from multiple sources or calculates internally. Data is for 52-weeks ending 9/19/2017. (2)
Market Cap is an intraday value derived by taking outstanding shares multiplied by the current share price. Shares outstanding is taken from the most recently filed
quarterly or annual report and Market Cap is calculated using shares outstanding.
(3) Enterprise Value is a market-based measure of a company’s value and is generally equal to Market Cap plus debt minus total cash and cash equivalents.
(4) MedEquities went public on Septembr 28, 2016 at $12 per share, and announced a $0.21 dividend.
(5) Quality Care Properties was spun out from HCP effective November 1, 2016. (6)
Care Capital Properties was merged into Sabra Health Care REIT effective August 16, 2017.
(7) Formerly Health Care REIT.
Chart Source: Yahoo! Finance
16 CBRE | Please visit our website at cbre.com/nationalseniorhousing17 Capitalization Rates, Transaction
Activity & Underwriting
Decade in Review - Senior Housing Transaction Volume
Dollar Value of Publicly Announced
Senior Housing & Care Transactions (2008-2017)
$30 400
350
$25
Transaction Volume (Billions)
Number of Transactions
300
$20
250
$15 200
150
$10
100
$5
50
$0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Transaction Volume (Billions) Number of Transactions
Chart Source: The Senior Care Acquisition Report, 23rd Edition 2018.
Senior Housing & Care Transaction Activity By Buyer Type
Cross-Border (Internationally Based) Private
A buyer is defined as “cross-border” if the buyer or major Private, as an investor type, refers to companies whose control is
capital partner is not headquartered in the same country where in private hands and whose business is primarily geared toward
the property is located. An increasing number of firms have operating, developing, or investing in commercial real estate.
subsidiaries accessing capital in multiple countries so a firm may This includes private equity joint ventures, commingled funds and
have two headquarters locations for the purposes of the chart high net worth family offices.
analysis. For example, Deutsch Bank (DB Real Estate) is assumed
to be based in Germany for deals outside of the United States Public Listed/REITs
while their acquisitions within the United States are assumed to be Companies and/or funds traded on open public markets whose
made via its domestic headquartered subsidiary, RREEF. business is primarily geared toward investing in and/or operating
or developing commercial real estate. These include REITs, REOCs
Institutional and publicly-listed funds.
Institutional refers to an investor, such as a bank, insurance
company, retirement fund, hedge fund or mutual fund that is User/Other
financially sophisticated and makes large investments, often held Users of commercial property for specific purposes; business
in very large portfolios of investments. users, government, educational or religious institutions who own
real estate for their own use.
60% Seniors Housing Transaction Activity ($B) By Buyer Type
51%
50% 46%
40% 38%
34%
34.0%
Buyer %
30%
30.0%
30% 27% 26% 25% 27%
27.0%
25% 24% 24% 23%
21%
20%
14% 14%
11% 12%
10% 9%
9.0%
10% 5%
1% 2% 1% 0%
0.0%
0%
2014 2015 2016 2017 2018 YTD
User/Other Private Public Listed/REITs Cross-Border Institutional
Chart Source: Real Capital Analytics, May 29, 2018. Senior Housing transactions only.
CBRE | Please visit our website at cbre.com/nationalseniorhousing 17CROSS-BORDER TRANSACTION ACTIVITY ANALYSIS
During the past three years, the senior housing investment market has witnessed a continual dynamic shift in
the investor profile mix. Historically, publicly-traded buyers (mainly REITs) have represented a majority of the
transaction volume, although between 2016 and 2017 the public buyers were less active, many devoting resources
to portfolio repositioning efforts through coordinated dispositions. However, during the first half of 2018, publicly-
traded buyers represented 34.0% of transaction volume, the largest share of the total year to date transaction
volume. Additionally, senior housing is continuing to attract substantial interest from institutional investors, which
have accounted for approximately 30.0% of year to date transaction volume. Institutional buyers include banks,
insurance companies, retirement (pension) funds, hedge funds and mutual funds. By comparison, institutional
investment accounted for only 11.0% of total senior housing transaction volume in 2015. Despite the recent uptick
in activity by public buyers, private equity remains extremely active in the senior housing investment community,
accounting for 27.0% of year to date transaction volume, in-line with historical private equity investment share.
Private equity buyers include dedicated senior housing funds, opportunity funds and commingled funds with core
plus and value-add investment objectives. Cross-border buyers captured a 9% share of the 2018 YTD transaction
volume. Multinational investment platforms from Europe, Asia and the Middle East are actively seeking investments
in U.S. based senior housing.
Cross-Border Senior Housing Investment by Region
$4,500
$4,062
$4,000
$3,357
$3,500
$3,000
$2,572
$2,500
Millions
$2,000 $1,736
$1,500
$1,000
$535
$500
$0
2014 2015 2016 2017 2018 (YTD)
East Asia Western Europe United States Australia - NZ MidEast United Kingdom Canada Southeast Asia Total
Source: Real Capital Analytics, Q2 2018.
18 CBRE | Please visit our website at cbre.com/nationalseniorhousingGENERAL INDUSTRY PARAMETERS - PRICING
Senior Housing/Nursing Care Value Estimated at $469.2 Billion
Majority Nursing
Care 25.3%
Majority Independent
Living 43.0%
Majority Assisted
Living 31.7%
Chart Source: The Senior Care Acquisition Report; 23rd Edition 2018 and NIC MAP®
Data Service.
Historical Value Per Unit Pricing
Senior Housing (IL/AL) Price Per Unit Independent Living (IL) Price Per Unit
$275 $275
$225 $225
(thousands)
(thousands)
$175 $175
$125 $125
$75 $75
2009 2010 2011 2012 2013 2014 2015 2016 2017 2009 2010 2011 2012 2013 2014 2015 2016 2017
Median IL/AL price per unit Average IL/AL price per unit Median IL price per unit Average IL price per unit
Assisted Living (AL) Price Per Unit Nursing Care (NC) Price Per Bed
$275 $105
$95
$225
$85
(thousands)
(thousands)
$75
$175
$65
$55
$125
$45
$75 $35
2009 2010 2011 2012 2013 2014 2015 2016 2017 2009 2010 2011 2012 2013 2014 2015 2016 2017
Median AL price per unit Average AL price per unit Median NC price per bed Average NC price per bed
Chart Source: The Senior Care Acquisition Report; 14th Edition 2009, 23rd Edition 2018.
CBRE | Please visit our website at cbre.com/nationalseniorhousing 19SENIOR HOUSING CAPITALIZATION RATES
Senior housing aggregate capitalization rates resumed their downward trend during 2017, a rebound from
their brief uptick due in part to the REIT pullback and a high concentration of value-add deals during 2016. An
abundance of affordable equity capital, in tandem with interest rates that can still be considered historically low
has driven this continued compression. An additional contributing factor was the quality of the properties that
traded during 2017, which included a higher proportion of newer and/or stabilized product. Generally speaking,
the capitalization rates reflected in the chart below are after a management fee and before a capital replacement
reserve and NOI is based on the trailing 12-month period before the sale or year-to-date actuals annualized. The
average and median capitalization rates below are unweighted and the average unit weighted capitalization rate
weighs each transaction’s capitalization rate based on its number of units. Consistent with prior years, the average
unit weighted capitalization rate in 2017 (6.6%) was lower than the unweighted average capitalization rate (7.5%).
12.0%
11.0%
Capitalizatoin Rates
10.0%
9.0%
8.0%
7.0%
6.0%
Average Cap Rate
Median Cap Rate
Source: Senior Care Acquisition Report, 23nd Edition 2018
20 CBRE | Please visit our website at cbre.com/nationalseniorhousingSENIOR HOUSING CAPITALIZATION RATES
Summary by Product Type
The following survey reflects the knowledge and collaboration of CBRE Research, Capital Markets and Valuation &
Advisory professionals who provided their estimation of capitalization rate ranges based on recent interactions with
active investors in their market. Core and non-core classifications are based upon the perception of each respondent
and represent their assessment of multiple factors including physical plant and market area characteristics.
Stabilized Property Acquisitions Stabilized Property Acquisitions
PROPERTY CLASS/ PROPERTY CLASS/
SECTOR H2 2017 (%) SECTOR H2 2017 (%)
TYPE SEGMENT TYPE SEGMENT
AA 5.23 A 4.67
Infill B 5.15
A 6.07 C 5.19
Multi-family
CBD A 4.96
B 6.90 Suburban B 5.49
C 6.32
C 8.56 Luxury 7.01
Office
AA 6.38 Full-Service 7.69
CBD
Select-Service 8.05
A 7.14 Economy 9.16
Hotel
Suburban Luxury 7.61
B 8.24 Full-Service 8.23
Suburban
Select-Service 8.60
C 9.67 Economy 9.65
A 5.25 IL 5.40
Industrial All B 6.27 AL 6.10
Core
C 8.07 (Class A MC 6.70
Avg.)
Neighbor- A 5.79 NC 11.20
hood /
B 7.23 Senior CCRC 7.10
Community
Center C 9.03 Housing* IL 6.30
Retail A 6.84 AL 6.60
Non-Core
Power B 7.97 (Class A MC 7.10
Avg.)
C 9.13 NC 11.80
High Street A 4.67 CCRC 6.00
Source: CBRE Research: CBRE North America Cap Rate Survey Second Half 2017
*Note: Senior Housing figures come from CBRE Research’s U.S. Seniors Housing & Care Investor Survey and Trends Report; Winter 2018.
CBRE | Please visit our website at cbre.com/nationalseniorhousing 21SENIOR HOUSING INVESTMENT RETURNS
The Property Index Performance Data provided
by the National Council of Real Estate Investment Cumulative NCREIF Total Returns
Fiduciaries (NCREIF) demonstrates that reporting NPI vs. Multi-Family vs. Senior Housing
senior housing properties have generally Over the last ten years, Seniors Housing returns have consistently
outperformed the broader National Property outperformed other types of real estate.
Index (NPI) since at least 2003. 8,000
7,000
The senior housing total return for Q1 2018 was
Stabilized Senior Housing
6,000
2.14%, which is comprised of a 1.36% income 5,000
return and a 0.79% capital appreciation return.
Index
4,000 Total NPI
Over the past four quarters, senior housing 3,000
returned 12.79% (5.59% income and 6.94%
2,000
appreciation). This is relatively consistent with Apartments
the seven-year total return of 13.63%, and is 1,000
Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018
5.7% greater than the NPI return of 7.09% and 0
Total NPI Multi-Family Senior Living Stabilized
6.46% greater than the multi-family total return
of 6.33%. Over a seven-year period, senior
Chart Source: NCREIF Query Tool. 3Q04 = 1,000.
housing returns have outperformed the NPI and
multi-family in total returns and income returns.
The stronger performance seen in the senior
Cumulative NCREIF Appreciation Returns
housing sector may reflect the fact that senior NPI vs. Multi-Family vs. Senior Housing
housing has seen continuous rent growth, despite 2,900
significant fluctuations in the general economy. 2,700
The following charts illustrate the returns achieved
2,500
2,300
by the senior housing component as compared 2,100
to the multi-family component and the overall
Index
1,900
1,700
index. Items shown for each quarter represent 1,500
that particular quarter’s return, while periods 1,300
showing a single year or multiple years represent 1,100
900
the compounded annual index returns achieved Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018
for that period. All returns are before fees. Total NPI Multi-Family Senior Living Stabilized
Senior Housing Returns
Chart Source: NCREIF Query Tool. 3Q04 = 1,000.
Total Returns
Total Total Stabilized
Total NPI Multi-Family Senior Housing
Q1 2018 1.69 1.46 2.14
Q4 2017 1.77 1.62 4.12
Q3 2017 1.70 1.66 2.73
Q2 2017 1.75 1.45 3.24
Q1 2017 1.62 1.30 2.57 Cumulative NCREIF Income Returns
One Year Index 7.09 6.33 12.79
Three Year Index 8.74 7.97 13.16 NPI vs. Multi-Family vs. Senior Housing
Five Year Index 10.06 8.99 14.88
Seven Year Index 10.63 10.09 13.63 2,700
2,600
Capital (Appreciation) Returns 2,500
2,400
Total Total Stabilized 2,300
Total NPI Multi-Family Senior Housing 2,200
Q1 2018 0.57 0.40 0.79 2,100
2,000
Q4 2017 0.63 0.55 2.79 1,900
Q3 2017 0.56 0.59 1.38
Index
1,800
Q2 2017 0.59 0.35 1.82 1,700
1,600
Q1 2017 0.48 0.20 0.96 1,500
One Year Index 2.37 1.90 6.94 1,400
1,300
Three Year Index 3.84 3.32 7.17 1,200
Five Year Index 4.86 4.13 8.43 1,100
1,000
Seven Year Index 5.16 5.00 6.95 900
Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018
Income Returns
Total Total Stabilized
Total NPI Multi-Family Senior Housing Total NPI Multi-Family Senior Living Stabilized
Q1 2018 1.12 1.06 1.36
Q4 2017 1.13 1.07 1.34
Q3 2017 1.14 1.07 1.36 Chart Source: NCREIF Query Tool. 3Q04 = 1,000.
Q2 2017 1.16 1.10 1.42
Q1 2017 1.15 1.10 1.61
One Year Index 4.63 4.37 5.59
Three Year Index 4.77 4.55 5.70
Five Year Index 5.02 4.72 6.09
Seven Year Index 5.27 4.91 6.36
Source: NCREIF
22 CBRE | Please visit our website at cbre.com/nationalseniorhousingUNDERWRITING GUIDELINES
Because senior housing is a hybrid between multi-family and hotel property types, there is an added complexity to
the underwriting process. Unlike office, multi-family, industrial and retail, simple ARGUS or other canned models
are not conventionally used. Rather, customized Excel models are developed — adding time and complication
to the process. Below are standard assumptions that are often incorporated into underwriting models as well as
questions that underwriters should consider. These assumptions reflect the current environment.
Assumptions based on Community / Market Conditions
Current Occupancy Condition Strong Good Fair / Poor
Occupancy
> 95% Lease-down to 96% Lease-down to 95% Lease-down to 93%
90-95% Lease-up to 95% Lease-up/down to 94% Lease-up/down to 91%
< 90% (Initial Community Lease-up) Lease-up to 95% Lease-up/down to 93% Lease-up/down to 91%
80% - 90% (Not initial lease-up) Lease-up to 93% Lease-up to 90% Lease-up/down to 85%
70% - 80% (Not initial lease-up) Lease-up to 85% Lease-up to 80% Lease-up/down to 75%
60% - 70% (Not initial lease-up) Lease-up to 75% Lease-up to 70% Stabilize at current
< 60% (Not initial lease-up) Stabilize at current Stabilize at current Stabilize at current
Lease-Up/Down Net Units/Beds Per Month
> 95% 4 4 2
90-95% 4 4 2
< 90% (Initial Community Lease-up) 4 4 2
80% - 90% (Not initial lease-up) 3 2 1
70% - 80% (Not initial lease-up) 3 2 1
60% - 70% (Not initial lease-up) 3 2 1
< 60% (Not initial lease-up) 3 2 1
Rate Assumptions
Yr. 1 Yr. 2 Yr. 3 Yr. 4> Yr. 1 Yr. 2 Yr. 3 Yr. 4> Yr. 1 Yr. 2 Yr. 3 Yr. 4>
Current Rates 4.5% 4.5% 4.5% 4.5% 4.0% 4.0% 4.0% 4.0% 3.0% 3.0% 3.0% 3.0%
Street Rates 5.0% 5.0% 5.0% 5.0% 4.5% 4.5% 4.5% 4.5% 3.5% 3.5% 3.5% 3.5%
< 60% (Initial lease-up) 0.0% 2.5% 5.0% 5.0% 0.0% 2.0% 3.5% 4.0% 0.0% 2.0% 3.0% 3.5%
Occupancy Assumptions
P&L or Rent Roll Always use current rent roll if the data is trusted.
Lease-Up Lag Should be zero months unless community specific information dictates otherwise.
Independent Living - 36 months; Assisted Living - 24 months; Memory Care - 20 months and Nursing Care -
Rollover
12 months.
Other Revenue Assumptions
Care Revenue Either Based on trended actuals, Operator Budget, Or Built up through Care Utilization Matrix.
New Resident Fee Based upon actual fee received and trended forward.
Second Resident Fee Based upon actual fee received and trended forward. Increased with in-house rents annually.
Other Revenue Either Based on trended actuals, Operator Budget, Or Built up Lease-Up Utilization Analysis.
Expense Assumptions
Normal Operating Expens-
Either Based on trended actuals, Operator Budget, Or Built up Lease-Up Utilization Analysis.
es
Utilities Either Based on trended actuals, Operator Budget, Or Built up Lease-Up Utilization Analysis.
Insurance (GL & Property) Obtain current quote or base on in-place policy coverage and then grow 3.5% per year thereafter.
Based on current tax bill; increase 3.5% per year thereafter or as state/county dictates based on fixed annual
Property taxes
increases or reassessment triggered by sale.
Management Fees 5.0% of Revenue.
Capital Expenditures $300 to $500 / unit per year.
CBRE | Please visit our website at cbre.com/nationalseniorhousing 2324 Structured Debt
Options
U.S. Treasury Yield Curve Rates
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
10 Year Treasury 5 Year Treasury Linear (5 Year Treasury)
Source: U.S. Treasury (January 2, 2004 - June 26, 2018)
• The 10-year Treasury note rate is considered one of performance versus other commercial real estate
the major pricing benchmarks in the debt market. As classes, etc.). Senior housing has one of the lowest
illustrated in the chart above, the average 10-year U.S. default rates, yet it has higher interest rate spreads. As
Treasury Yield Curve Rate ended calendar years 2015 such, lenders have become more comfortable with the
and 2016 at 2.27% and 2.45%, respectively, with a nuances of the operating component of assisted living
2017 average rate of 2.33%. and memory care. Note, however, that these lenders
generally have a preference toward 100% private pay
• There was concern when interest rates spiked after the independent living, assisted living and memory care
conclusion of the 2016 U.S. presidential election. The (as opposed to nursing care facilities with government
benchmark 10-year Treasury stood at 2.45% at closing reimbursement dependencies). Nursing care has
on December 30, 2016, up 62 basis points (“bps”) become generally accepted in the lending community
from Election Day on November 8, 2016. In 2017, if it is part of a campus (i.e. a rental continuing care
Treasuries remained flat or slightly down year over year. retirement community with a skilled component), which
Today, the 10-year Treasury sits at 2.90% (as of June includes the full continuum of care.
25, 2018) and the 2018 YTD average is 2.84%.
• A handful of life insurance companies are still quoting
• Although credit spreads remain competitive, the comparable spreads to the Agencies for 5, 7 and 10-year
rise in the 10-year Treasury rate by roughly 50 bps fixed rate mortgages (with preference towards 7 and 10-
in 2018 has undoubtedly increased debt capital costs year fixed-rate). Eligible product types are independent
for borrowers. Given most acquirers in the sector are living, assisted living and, memory care (assuming it’s
now users of secured debt, the cost of debt capital in a small percentage of the campus). In addition, three
a continued rising interest rate environment has begun to four additional insurers are comfortable lending on
to impact valuations; more significantly in the value- 100% independent living product. Most insurers require
add space where a heavier reliance exists upon higher a lower LTV and larger loans ($25M+). There are one to
leverage debt. two life insurance companies with competitive floating
rate programs, however, construction to permanent
• Over the past several years and continuing in 2018,
programs are not currently available programmatically.
there has been a heightened awareness and interest
in senior housing from life insurance companies, other • The multi-family lending caps are intended to further
traditional balance sheet lenders and several new debt the Federal Housing Finance Agency’s (“FHFA”) strategic
providers. These lenders find the sector compelling for goal of maintaining the Agencies (Fannie Mae and
the same reasons as equity investors (demographics, Freddie Mac) as a backstop for the multi-family finance
24 CBRE | Please visit our website at cbre.com/nationalseniorhousingSENIOR HOUSING STRUCTURED DEBT OPTIONS
market without impeding the participation of private 30% to 35% cash equity (resulting in leverage of 65%
capital. For the 2018 calendar year, the Agency volume to 70%) priced at 275 to 350 basis points over 30-day
caps were initially set at $35 billion. Important to note, London Interbank Offered Rate (“LIBOR”). Over the past
loans in affordable and underserved market segments 18 months, non-recourse new construction financing
will operate in the same capacity in as the prior years and (limited to completion guarantees) has become very
are excluded from the cap. If the restricted affordable scarce, even for the highest-caliber firms with significant
housing units make up less than 50% of the total units, track records in the space. This can be attributed to a
the FHFA will exclude 50% of the loan amount from the number of factors including aggregate supply concerns,
cap. Also, if 50%-plus of the units are restricted units, where we are in the current real estate cycle, and HVCRE
the FHFA will exclude the entire loan amount from the High Volatility Commercial Real Estate (“HVCRE”)
cap. Throughout 2018, the FHFA will again review the regulation within the Basel III capital requirements. In
Agency’s estimates of the multifamily loan origination addition, spreads have widened 50 to 75 bps along
market size on a quarterly basis. If the FHFA determines with increases in LIBOR rendering construction loans
that the actual 2018 market size is greater than was approximately 100 to 150 bps more expensive today.
projected, it will apply an appropriate increase to the
capped category. If FHFA determines that the actual
2018 market size is smaller than was projected, it will not
reduce the capped category. Overall, the volume caps
imposed are not impacting the lending climate today the
same way that they did when first implemented in 2015.
• Offering floating rate mortgages with interest rate
spreads lower than any balance sheet lenders, the
Agencies continue to offer the lowest cost floating rate
debt in the sector. However, many regional and national
banks offer competitive floating rate programs with three
to five-year terms and competitive interest only periods.
• New bridge and mezzanine lending sources for non-
stabilized communities have favorably emerged in this
sector. Many of these bridge financing sources are
priced between 100 to 300 basis points above Agency
floating rate spreads. Bridge lenders include select
traditional banks (both national and regional) and other
specialized higher yield financial investment firms. Non-
recourse bridge financing is available for experienced
and strong borrowers at leverage levels up to 80%.
• Construction debt is primarily available through
traditional HUD loans, regional banks, local banks
(particularly for smaller deals when an established
relationship between the borrower and lender exists), and
on a very limited basis, through life insurance companies
via construction to permanent loan programs. Many
larger national banks are also providing construction
debt. Strong borrowers with a strong track record,
evidenced by stabilized portfolios producing solid
overall cash flows, might expect partial recourse with
CBRE | Please visit our website at cbre.com/nationalseniorhousing 2526 About CBRE National
Senior Housing
CBRE National Senior Housing is a fully integrated on senior housing, providing a range of services. We
platform of professionals dedicated to the senior provide investment opportunities to the marketplace
housing industry. The platform consists of four separate across a broad spectrum of senior housing property
and distinct concentrations: investment sales, debt and types including:
structured finance, investment banking, and valuation.
Our investment sales team has successfully transacted • Age-Restricted Multi-family
on over $17 billion in property sales dating back to 1998; • Independent Living
our average annual sales volume since 2014 exceeds • Assisted Living
$1.4 billion. The Team offers a depth of expertise rarely • Alzheimer’s/Memory Care
found in the senior housing sector. Its partners: Lisa • Skilled Nursing and Continuum of Care
Widmier, Matthew Whitlock and Aron Will possess a • Entry Fee CCRC Communities
combined 61-year senior housing-specific industry
experience and $28.9 billion in transaction volume. Our services include:
Our experience personally as developers, institutional • Investment Property Sales
investors, appraisers and owner/operators provides • Structured Debt
us with an intimate familiarity and perspective of a • Investment Banking
transaction from all sides. • Valuation
• General Consulting
CBRE National Senior Housing focuses exclusively
26 CBRE | Please visit our website at cbre.com/nationalseniorhousingOUR NATIONAL PRESENCE
CBRE has assembled a fully integrated Team with the requisite experience, expertise, and successful track record
necessary to successfully structure and execute a transaction to meet the Client’s objectives.
820+ Communities
110,000 Units/Beds
45 States
WA
ME
MT ND
OR MN VT
NH
ID NY
WI MA
SD
WY MI CT RI
IA PA
NE
NV NI
OH MD DE
IL IN
UT
CO WV
KS VA
MO
CA KY
NC
TN
AR OK
NM AR SC
AL GA
MS
TX LA
FL
CBRE National Senior Housing Offices:
San Diego, Houston and Boston
States where CBRE Team Members have conducted business
IN PROCESS TOTAL COMPLETED DEBT
2018 2014-2017 ORIGINATIONS
$3.5B $10.1B TOP 2
CBRE National Senior Principals of the CBRE CBRE National Senior
Housing has closed, is National Senior Housing Housing was ranked
actively marketing, or team completed more than Top Two Senior Housing
is under contract on $10 billion in senior housing Originator in the nation
$2.3 billion of sales and investment sales and debt from 2010 through 2016,
investment banking transactions between 2014 and was the #1 Senior
transactions encompassing and 2017 encompassing Housing/Age Restricted
nearly 6,500 units across more than 46,000 units Originator in the U.S in
the U.S. In addition, CBRE nationwide. both 2013 and 2014 and
National Senior Housing #2 in 2015. The team
has closed or has in originated $3.7 billion in
process approximately $1.2 debt transactions over the
billion of debt originations. past three years.
CBRE is the largest agency
originator (Fannie/Freddie)
in the nation with over $18B
of loan volume in 2017 and
has been Freddie Mac’s #1
Seller Servicer from 2009
to 2017.
CBRE | Please visit our website at cbre.com/nationalseniorhousing 27A PARTIAL LIST OF SIGNIFICANT ASSIGNMENTS
Sales Assignments Consideration Units
Vintage Portfolio (22) $1.3 Billion 3,055
The Sunwest Portfolio $1.25 Billion 11,100
Maestro Portfolio $921 Million ,206
8
The Fountains Portfolio $640 Million 3,637
Brightview I Portfolio $498.5 Million 1,584
rightview II Portfolio
B 363.5 Million
$ ,117
1
The Bristal Portfolio $290 Million 931
ramerica-Sunrise UK Portfolio
P 247 Million
$ 37
4
Pacifica Portfolio $187.7 Million 720
LCS CCR Portfolio $186.5 Million 1,104
7 Community AL/MC Portfolio $186.3 Million 526
5 Community Allegro Portfolio $172.5 Million 705
L ang Nelson Portfolio 127 Million
$ ,166
1
Ventas Portfolio $121.2 Million 1,295
7 Community AL/MC Portfolio $120.7 Million 00
5
Baynorth/Watermark Portfolio $114.5 Million 496
BK California Portfolio
M $104.5 Million 93
2
3 Community IL/AL/MC Portfolio $101.7 Million 310
Debt Assignments Loan Amount nits
U urpose
P Lender
The Fountains Portfolio $410.0 Million 3,663 Sale & Acquisition Agency
Ranger 36 Portfolio $348.6 Million 2,524 Refinance Agency
Credit Facility $271.3 Million 1,258 Acquisition Agency
Two Community CA and AZ Portfolio $80.0 Million 275 Acquisition Life Co.
Regency Oaks of Clearwater $75.0 Million 471 Refinance Agency
Bonaventure Portfolio $72.5 Million 453 Acquisition Agency
CSH Seattle Portfolio $60.0 Million 368 Acquisition Bank
Cascade Portfolio $58.5 Million 469 Refinance Agency
The Village of Woodlands Waterway $55.2 Million 207 Sale & Acquisition Agency
MorningStar Portfolio $53.0 Million 196 Sale & Acquisition Finance Co.
The Arbor Terrace Portfolio- GA 2 $50.5 Million 236 Sale & Acquisition Agency
The Village at River Oaks $49.7 Million 195 Construction Bank
The Cornerstone Portfolio $49.6 Million 172 Acquisition Life Co.
The Golden Pond Portfolio $48.5 Million 578 Sale & Acquisition Finance Co.
Georgetown Development $41.9 Million 210 Construction Other
The Springs at Greer Gardens $40.1 Million 217 Construction Bank
Franklin Park at Alamo Heights $40.0 Million 220 Construction Bank
“ CBRE SH recently closed a $186.5 million senior housing portfolio transaction with first-time Middle
Eastern capital. This transaction is yet another example of how CBRE can deliver superior results
for its clients. Collaboration among four different CBRE practices – Investment Properties, Debt and
Structured Finance, Investment Banking, and Valuation and Advisory Services – made this highly complex
transaction possible, allowed for the existing operator to remain, and also expedited the closing process.
“
28 CBRE | Please visit our website at cbre.com/nationalseniorhousingYou can also read
