What mood are we in for at this year’s Spring NIC in San Diego? The latest consumer spending data from the Commerce Department showed persistent strength in the economy, boosting the chances of perhaps another 50-basis point increase in the fed funds rate at the next Fed meeting.
What will that do to investor and lender sentiment? It’s not as though they are operating in new territory, having dealt with successive 75-basis point increases last year. But scrutiny on deals will increase, prices should fall, and fewer deals could be consummated by the fewer growth-oriented, deep-pocketed buyers out there, in addition to the strategic buyers with local or regional banking relationships to lean on. On the other hand, seniors housing and care’s attractive yields, relative to other real estate classes, could attract investors from other industries as interest rates rise, so we don’t know how the buyer pool will change, if at all.
As far as existing property owners, unless you have to sell, due to pressure from your lender to get the loan off their books, disastrous operations and/or closing out a fund, 2023 doesn’t seem to be the year to sell. So, we’ll see fewer “A” quality properties sold and more turnaround deals close, at a discount.
We’ll keep an eye on M&A activity and valuations as the year goes on, releasing some updated statistics along the way. Until then, my colleague Jean McDonough and I are looking forward to seeing you all in San Diego.
