An appraiser recently contacted us about a survey they were conducting. They were trying to get a better understanding of the effect Coronavirus and Covid-19 may be having on transactions involving sales and acquisitions of assisted living facilities. We shared our opinion with them and we wanted to share our thoughts with you too. Here are a few of the questions and our best answers as of today (all this is subject to change, like everything else lately).
Are buyers still in the market?
Yes, buyers are still in the market. Some buyers have clearly gone to the sidelines and decided to wait a while before looking at new deals. But others, many others, keep moving forward. They’re calling us every day about our new offerings and sharing their shopping list with us. Buyers are moving slower and more carefully (wisely, I’d agree), but they’re moving forward nonetheless recognizing that this will pass and there will be more seniors needing care next year than this year. So investments in senior care properties are still a priority for many buyers.
What is the impact on prices?
It may be too early to say. During the stay at home orders, we were able to put at least one deal in contract at near-record prices. We’ve heard from some buyers and industry sources that many are taking another look at the risk premium of senior care assets. Still, when compared to many other types of real estate investments, senior care properties have safeguards built into their demand and revenue that others might be struggling with today – restaurant, retail, and office properties have some serious issues today. So the bottom line may be that seasoned buyers of senior care properties will understand risks and not adjust pricing while some of those new to the senior care market (there are many) may need a bit higher yield on their investment. Time will tell – and hopefully, it won’t take much time.
Are there delays for deals already in contract?
In almost every case, the answer is yes. We’ve had several deals that were in contract since before this period already have one or more extensions. But everyone seems to be playing nice and recognizing it’s absolutely necessary for now. It’s nearly impossible for appraisers, lenders, inspectors, title companies and others to complete their work on the same schedules we’re accustomed to – even though most are doing amazing work under the circumstances. We’ve seen most contracts extended by the time period of any stay at home orders, which has been challenging because some original orders have been extended further.
Should sellers wait to go to market with their property?
For some, perhaps. The impact to the income statement over the past few months will be more significant for some than others. And to the extent that a buyer expects a price adjustment for the hit to a property’s net operating income, then a seller may simply pull the plug and wait for the trailing 3, 6 or 12 month P&L to get back to normal. Still, other buyers are willing to look back to the months prior to Covid-19 for their pricing analysis but take a closer look at everything through their due diligence. So a seller’s decision to move ahead or not is an individual one that’s a case-by-case analysis we’ve helped many with lately, and some are still coming to market this week – you’ll hear more about those soon!
Do you have any questions? Leave a comment below or send an email to firstname.lastname@example.org and we’ll get back to you.