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Seniors Housing and Skilled Nursing Could Be Investor Favorites

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Skilled nursing sectors investor favorites, a new report from Marcus & Millichap predicts.

Third quarter data showed that seniors housing move-ins are rising as more residents become vaccinated, with occupancy rising in both segments from July through September. Rents are also up annually by more than 1% across all four levels of care, led by memory care and assisted living.

Skilled nursing’s recovery was a bit more muted, with occupancy at 76.2% in November, down 1,000 basis points over 2019 numbers. But nationally, the average daily rate has increased or held firm in every quarter for more than a decade.

“But the near-term future is opaque with the pandemic still creating uncertainty,” Marcus & Millichap’s Benjamin Kunde notes. “However, seniors housing and skilled nursing facilities remain a key piece of the care spectrum, and the current environment may present unique favorable circumstances for investors. Temporary hurdles coincide with longer-term tailwinds that are becoming more apparent.”

Development has eased as of late, with less than 48,000 seniors housing units breaking ground in October, a 30% decrease from the typical pace. But Kunde says “robust demand is on the horizon, potentially outpacing supply and powering occupancy improvement.” In particular, aging baby boomers are likely to push a demand surge in the future, and they have money to spend: some estimates say the segment holds more than half of all US wealth.

One potential headwind? Labor shortages, which continue to plague both segments. A study by the American Health Care Association and the National Center for Assisted Living shows that three-fourths of respondents believe the staffing situation for assisted living has gotten worse from midyear through September.

“Many operators are utilizing higher compensation to attract staff, which is costly at a time when insurance fees have increased and infrastructure improvements are needed for virus containment,” Kunde notes. “Furthermore, some operators are allocating funds to ramp up marketing efforts, as many facilities are trying to fill rooms at the same time. Endeavors to entice prospective residents are especially important in the near term, as move-ins should accelerate once a broader return to workplaces reduces the number of people able to provide at-home care.”

Meanwhile, investors who pressed pause during the pandemic have a stash of capital and are reentering the market. Sales volume has matched the 2020 total already, and Kunde predicts that momentum will continue as owners list properties following the end of government stimulus funds which helped keep the industry afloat.

“The cost of capital remains low, and potential interest rate hikes and tax changes on the horizon could drive sales activity in the near term,” Kunde says. “Still, many investors are taking a cautionary approach as various short-term headwinds are lingering. Uncertainty in the marketplace and ongoing price discovery adds a wrinkle to getting deals done.”

 

Source: GlobeSt.

How Big Will The Health Care In Malls Concept Get?

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The way America shops has changed, but some experiences are still better in person. The same can be said of health care.

Not long ago, outpatient health care and megamalls would have seemed like an odd marriage. But today’s consumers understand this is a marriage of convenience — one that can offer great benefits.

“The demand for health services detached from a large hospital is growing rapidly,” said Patrick Christensen, president of Sturtevant-based Horizon Retail Construction. “People are seeking out more options and want health care that is closest to them.”

Why Malls?

As much of retail has moved online, malls have one key commodity: space. And that space is getting more plentiful. According to Moody’s Analytics’ commercial real estate division, the mall vacancy rate in the first quarter of this year was a record high 11.4%.

Outpatient health care organizations can fill those spaces. The footprint of health care facilities can vary greatly. An urgent care clinic might fit well in a former bookstore. Other health care providers might require more square footage.

One Hundred Oaks mall in Nashville offers a case study for the ways outpatient health care facilities can revive a struggling retail space. Before 2009, stores were leaving and the mall was emptying out fast. Then Vanderbilt University Medical Center’s Vanderbilt Health facility moved in, taking up nearly half of the mall’s space. The new health care facility brought in foot traffic, which in turn attracted traditional retailers and breathed new life into the once-troubled shopping mall.

More Medical Malls?

The number of Americans 65 and older is projected to nearly double from 52 million in 2018 to 95 million by 2060, according to data from the U.S. Census Bureau. Demand for health care services should grow as the population ages.

Considering the benefits that malls offer patients — accessibility, physical space and proximity to other retailers and activities — the potential for continued growth of outpatient health care facilities in malls is immense.

“We are seeing a demand for more outpatient facilities off the campuses of large hospitals,” Christensen said.

Expertise in building care facilities

Sturtevant-based Horizon Retail Construction is uniquely positioned to help shape the way vendors and buyers experience malls. The company has extensive experience transforming retail spaces to make them more conducive to the needs of both retailers and consumers. Horizon’s clients in the health care space include VillageMD and Walgreens, Oak Street Health, Benchmark Physical Therapy and Humana.

The project with Oak Street was particularly ambitious: Horizon was responsible for opening the Chicago-based outfit’s first two clinics in Memphis.

“We are proud to be involved in the Oak Street Health program,” Christensen said. “They provide a great service to the community.”

For a health care industry that is ever changing, Horizon’s ability to “mobilize rapidly,” as Christensen says, could be an asset. Horizon employs more than 150 superintendents — none of whom are subcontractors. That workforce creates a speedy response time to client needs.

“We have shown the ability to quickly adapt to tenant needs,” Christensen said. “Because of that we are valuable working for both small and large businesses.”

 

Source: Waco Tribune-Herald

Related Cos. Buying Stake In CareMax To Develop Senior Health Centers

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Related Companies is acquiring up to a 9 percent stake in Miami-based health care provider CareMax, with plans to develop about 75 senior health centers in underserved areas nationwide.

Related bought $5 million of CareMax stock, at a price of $10 per share as part of the agreement, and will serve as an investor, advisor, developer, and even as landlord of CareMax health centers, The Wall Street Journal first reported. CareMax or its affiliates will operate the new facilities, according to a press release.

“Quality healthcare is essential for all communities to thrive,”Bryan Cho, executive vice president of Related Companies, said in a statement. “We chose CareMax to help expand their reach because their fully integrated model is uniquely positioned to address the systemic issue many low-income seniors face.”

Cho will join the CareMax board of directors as part of the deal.

The Hudson Yards developer also received warrants to purchase up to 8 million additional shares at $11.50 per share, which can be exercised based on when the new medical centers that Related helped create are opened, according to the release.

“CareMax serves 65,000 people with its 42 Florida medical centers — about 22,000 of which are seniors — and will use the investment to expand its centers into Texas, Tennessee, New York and other states,” Ben Quirk, chief strategy officer at CareMax, said in a statement to Commercial Observer.

Three initial facilities have plans to open in 2022: a 8,000-square-foot spot at 651 River Avenue in the Bronx Terminal Market; a 5,000-square-foot outpost at 17-31 Seagirt Boulevard in Ocean Park Apartments in Far Rockaway, Queens; and a 27,000-square-foot spot on 1915 3rd Avenue in East Harlem, Quirk said. The leases are long term, though Quirk would not comment further on the terms.

The Miami health care company, founded in 2011, plans to open a total of 75 new centers in the next three years. Its residents pay monthly subscriptions through Medicaid and Medicare for health care, rather than fees based on individual office, clinic and hospital visits, per WSJ.

Related Companies, which got its start as an affordable housing developer after its founding in 1972, pointed to a growing need to serve affordable housing residents, who tend to age where they are rather than move, according to WSJ. The landlord, which owns 60,000 affordable housing units in 24 states, views health centers as a source of demand for flagging downtown retail spaces.

“Together with Related we saw that there is a profound nationwide need for medical and social care within and convenient to affordable housing communities,” Carlos de Solo, president and CEO of CareMax, said in a statement. “We engaged Related as our real estate advisors to assist us in locating our de novo medical centers directly within and near to these affordable senior communities nationwide.”

 

Source: Commercial Observer