Senior's Housing News Alert - July 2011


The seniors' housing industry during the last several years deflected the full brunt of the financial meltdown by emphasizing rigorous operational discipline and fortifying its capital position. Today, while other real estate sectors are licking their wounds and regrouping, senior living is on solid ground and ready to push forward to take advantage of low cost funding, attractive returns, greater investor interest, and compelling growth prospects. The seniors' housing industry is positioned for robust performance throughout the coming years and decades.

There are less than 1.5 million investment grade seniors' housing units in the U.S. today, and by 2015 there will be 22.4 million people over 75. The demographics will continue to drive growth and the industry continues to gain traction. 1Q11 occupancy was 87.9%, an increase of 20 basis points from 4Q10 when occupancy was 87.7%. Occupancy has risen for 4 consecutive quarters and is now 60 basis points above its cyclical low established one year ago. This is a result of slower inventory growth coupled with increased absorption during the past year. Demand for dementia care beds is high, as relatives have few alternatives for their stricken family members, while the risk of dementia doubles every five years after age 65. Over the past 7 years, generally need-based seniors' housing properties have outperformed the National Property Index published by NCREIF. Total returns were 11.2% vs. the Index of 7.3%. Seniors' housing was the only major property sector to report an increase in rental rates from 2009 to 2010 and has experienced the smallest decline in occupancy through the recession. However, we still have to deal with a constrained credit market, high unemployment, the suspended animation of distressed-asset resolution, the choppy housing recovery and record national debt.

Please see full alert below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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