We recently chronicled how the aging of the population continues to play a key role in driving demand for senior housing services and how the attractiveness of senior housing assets continues to be demonstrated by ongoing construction in the space and acquisition activity as well. Because of this, the appeal of these assets is now becoming clearer to an increasing number of investors who want in on the gains they are generating. Before the Federal Reserve raises its benchmark federal funds rate and the cost of borrowing and acquiring properties increases, investors who are interested in obtaining inexpensive capital for senior housing purchases should continue to look to the Chicago-based financing firm Cambridge Realty Capital for their financing needs.
While favorable demographics are unquestionably contributing to the demand for senior housing services, the current low interest rate environment is perhaps the most significant force contributing to the pace of acquisitions in the space. In addition to reducing the cost of borrowing, interest rates also have a large impact on property valuations. For example, when interest rates decrease, the value of senior housing assets increases, increasing the incentive for property owners to sell them. Accordingly, the aggregate effect of lower borrowing costs for purchasers and increased valuations for sellers has led to high levels of acquisition activity in the space. Furthermore, many of the investors that have gotten involved in senior housing are new entrants instead of the traditional investors of old. In terms of where these new investors are coming from, a number of them are private equity firms that stayed away from the sector in the past but have now become drawn to it because of the gains that senior housing assets are generating. These new entrants are also using different strategies to purchase these assets. For example, some firms are purchasing senior living communities outright, some firms are purchasing the land that these properties rest on, some are purchasing senior living operating companies, and still others are forming joint ventures with senior living providers and investing in the space that way. For example, in the last twelve months a joint venture controlled by the private equity firm Kayne Anderson Real Estate Advisors and Discovery Senior Living has purchased senior housing properties in Florida and Texas, and its management has made it clear that they intend to purchase at least 500 additional senior units by the end of this year.
Although opportunities to invest in the senior housing space are plentiful right now, this is likely to change in the future. As the Federal Reserve continues winding down its stimulus programs and interest rates begin to rise, the cost of borrowing will start to increase and valuations for senior housing properties will start to decrease. These actions are projected to lessen the number of investment opportunities in the market. Accordingly, investors who are interested in acquiring these assets and the gains that they generate before this happens should contactCambridge Realty Capital to learn more about the different financing options that it offers for acquisitions and other purposes as well.
