We have to say that there seems to be a good amount of optimism out there, despite an uncertain economy, an unsettling election cycle and constant pressure on operators to increase census and cash flow. Rates have a lot to do with it, as the 10-Year Treasury rate appears to have settled below 4% and expectations of one and more likely two rate cuts are increasingly becoming consensus. That is far from a sure thing, but we have heard that even one rate cut could be enough to bring a lot of buyers, sellers and lenders back into the fold, with the reasonable assurance that rates have started their descent.
We also spoke with a couple of lenders who described a much healthier debt and equity environment, as compared with a few months ago. Spreads have fallen for certain bank and debt fund deals, more regional banks are comfortable with providing debt, Fannie and Freddie appear to be competing for more loans nowadays, more and more properties have stabilized to qualify for permanent agency debt, some lifeco’s are coming back into the market, they are receiving multiple (or numerous) terms sheets on deals that would have normally gotten one or two earlier this year, and their own transaction pipelines are only strengthening throughout 2024.
So, in some ways, things are getting back to normal, and in others, we are more active than ever before. And if all of the transaction pipelines we have been hearing about come to fruition, 2024’s M&A totals will blow past all previous records. We’re already at 415 deals for the year, according to LevinPro LTC, and the current annual record? 559 transactions, from 2022. The question becomes will we reach that by Thanksgiving? Or Halloween?
