Capital One released its annual survey results from more than 150 senior executives about the 12-month outlook for various issues in seniors housing and skilled nursing. Despite record-high acquisition prices, 37% of the respondents believe acquisitions of existing facilities represent the biggest opportunity, with 30% believing repositioning existing properties represents the best opportunity. In addition, 89% believe the level of M&A activity will remain the same or increase in the next 12 months, split almost equally between the two.
Regarding challenges in the next 12 months, 33% cited labor cost pressures and 32% cited supply/demand imbalances. Fewer than 10% were concerned about an increase in interest rates. Geographically, the southeast and west coast were deemed to provide the best opportunities by 26% and 22% of the respondents, respectively, with only 10% believing the mid-Atlantic would provide the most opportunities for seniors housing and skilled nursing.
Real estate term loans were also very important to the respondents (30%). In speaking with Chris Taylor, Managing Director at Capital One Healthcare, most of their term loans average five years but can be longer in duration, and most borrowers today prefer a floating rate, which makes sense given the low interest rates at the short end of the yield curve. And in the current market, most requests are for seniors housing assets and are for acquisitions.
