TUCSON, ARIZONA -- Amid the uncertainty of 2020, multifamily real estate portfolios as a whole outperformed expectations. However, Senior Housing (Assisted Living and Memory Care) faced unique operational challenges during a pandemic particularly affecting the elderly.
The government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, were instrumental in keeping liquidity in the housing market. Entering 2021, the agencies continue their focus on mission-based lending to increase affordable housing, including the Senior Housing sector.
The first 10-bed Assisted Living home since January 2020 sold recently in Tucson. There have been larger sales such as Hand Maker Assisted Living (187 beds) that sold for $15.5 million January 2021 and Brookdale Senior Living that exercised an option to purchase eight assisted living facilities (336 beds) in three states for $39.26 million January 2020, but other that that, there hasn’t been any activity in this market sector for 2020.
Mark Biery, JD, CCIM, a specialist in Senior Housing with Berkshire Hathaway Commercial Real Estate handled the sale of Desert Steppes Adult Care for $340,000 ($34,000 per bed) – a sale of the real estate and the operating business going-concern. We spoke with Biery to ask his insight into what was happening in this market sector.
Biery explained that when the COVID-19 pandemic began, it created a highly uncertain market, causing lenders and owners to pull back.
Senior Housing owners have certainly faced pressure in 2020, including COVID-19 outbreaks in independent and assisted living and skilled nursing facilities that caused several to close. Occupancy has gone down as some families are choosing to have their parents age in place rather than move to congregant settings. Staffing, which was an issue pre-pandemic, is still one of the biggest operational challenges.
“Since no one is allowed in or out of the care homes, sellers are requesting anyone entering, including prospective buyers, be tested for COVID-negative,” Biery said. “After a COVID test, a buyer may need to quarantine for two weeks, if they were on an airplane, and that eliminates out-of-state buyers who otherwise would be interested. The home inspector has to be willing to be in full PPE garb, including full suit, gloves, boots, mask and face shield. We just can’t risk letting the Coronavirus into an adult care home.”
“Then to show prospective buyers the facility, we had the owner inside and the buyer outside the building. They spoke to each other on cell phones, as they went window-to-window, and the owner explained what the buyer was seeing on the other side of the glass,” Biery continued.
The buyer of Desert Steppes, being a healthcare professional from Tucson, understood the challenges of the transaction and closed February 2, 2021.
When the pandemic hit, Freddie Mac had to quickly start performing its countercyclical role, which it does in times of crisis and market volatility. Net operating income (NOI) for senior housing and healthcare continues to be under pressure, but the acceleration of the COVID-19 vaccine approval and distribution should create some stability going forward.
For more information, Biery can be reached at 520.235.2531.
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