Case Study: The Effects of New Investors on Seniors Housing Pricing

The capital in the seniors housing industry is very active now as a result of new players constantly entering the market. New deals are being formed, facilities are being swapped, and the market continues to grow daily. Such growth has allowed the seniors housing industry to be considered an institutional-grade asset class which is a title that demands the attention of private equity investors. The industry is also noticing investors from different product types beginning to enter the market.

The Stahler Group has seen the evolution of the seniors housing industry through several decades and understands how new investors can shape the future of the market by contributing capital.

A Case Study of a Distressed Asset:

A high-profile transaction was recently handled by The Stahler Group, one that included a distressed living facility in Southern California. The facility was listed at a very optimistic price that most would say was overvalued.

The team worked diligently on this transaction and began a strategic marketing plan that attracted several offers within weeks.

Offers from three well-established operators with years of experience were among the group of offers. Having several investments for over 10 years in the seniors housing market makes these individuals considerably seasoned. All three bids were within $500,000 of each other however, the bids were lower than the original asking price. The lower bids had been anticipated for the overvalued facility.

These bids speak volumes for the discipline that veteran investors have. It also shows that they are fair and understand the value of the seniors housing facilities in question. Keeping valuation and metrics fairly consistent are a few ways that veteran investors can set the parameters for the seniors housing industry.

Two more offers were received from buyers looking to acquire their first investment. Their experience in real estate had never crossed paths with the seniors housing investment market. Bids from newer investors were 40 percent higher than veteran investors and revealed that they too had plenty of capital to support their bids.

The transaction was able to move forward after the seller accepted the highest bid from one of the two freshman investors following a short bidding war.

New Players May Cost Veterans

It is natural for investors to accept the highest bid. However, this creates a problem for the experienced investor who feels like they must overpay in a market of new investors who are always willing to pay more than market value. This drives the average market costs much higher and guarantees that a buyer will be paying more than a facility is worth.

The seniors housing industry is easily affected by outside forces such as new capital from inexperienced investors, forcing valuations to rise higher than necessary.

The Top Brokerage in the Seniors Housing Industry

Veterans outnumber newcomers in the seniors housing industry that is currently filled with overvalued investments. The industry has a chance to change at any time. Experts at The Stahler Group have been trusted by the most experienced operators, to carefully guide them through the valuation process and the final closing of their deal.

Contact our team and find out how we can expedite the sales process for your future investments.