In 2014, senior housing real estate transactions surpassed the $25 billion mark. Further, there were a number of high profile mergers and acquisitions, most notably the $2.8 billion Emeritus/Brookdale merger, which gained widespread media attention both within and outside of the senior housing industry. The reasons for the merger were plentiful. The merger expanded the geographic reach of both companies, resulting in 6.5 million seniors who live within 10 miles of a Brookdale facility. The merger also allowed the consolidation of operations with anticipated savings in the tens of millions of dollars range.
Other Mergers Taking Place
These same reasons have prompted many senior living owners and operators to merge or acquire other operators. Accordingly, it is not surprising that industry executives largely believe that increasing number of mergers and acquisitions in the industry will continue through 2015, as many owners and operators see them as a preferred means of growth.
Yet for smaller operators, acquisitions aren’t always a financially viable option. Further, as the economy continues to improve, acquisitions are becoming even more expensive. There is an increasing demand for senior housing from seniors, an increasing number of seniors willing and able to pay high senior housing fees out of pocket, and an increase in investment activity and demand for acquisitions. All of these factors combine to drive up the costs of acquisitions.
Though often priced out of the acquisition market, many smaller operators have met with great success over the past few years and are looking for a means to grow their business. Construction for renovations and expansions has emerged as a viable alternative to acquisitions for many smaller senior housing facility operators looking to expand or just stay competitive. If you’ve been keeping up to date on our blog, you’re probably aware of the fact that two big trends in construction include the addition of specialty units particularly memory care wings and the addition or expansion of assisted living facilities.
A recent survey reported by Senior Housing News verifies this trend. The survey of 250 senior living operators, most of whom were small operators, revealed that approximately 62% were “extremely likely” to pursue a new construction project and “55% were “extremely likely” to pursue a renovation project this year. This is in contrast to the mere 23% who were “extremely likely” to acquire another facility or group this year.
Cambridge Realty Capital Offers Expert Financial Advice
Owners and operators looking to undertake a construction project this year have a number of financing options, including traditional banks on which many owners and operators still rely. However, Cambridge Realty Capitalprovides another option for financing that can often offer the capital needed without some the negatives associated with traditional banking institutions, including a lack of flexibility. Contact us today to talk about your next construction project.
