Senior housing is booming, baby

Though the overall housing market has not escaped the doldrums, the senior housing sector, driven by investment companies, has gone gangbusters since 2010.


In the third quarter of 2011 alone, 39 senior housing deals worth $5.5 billion were completed, primarily by real estate investment trusts that specialize in housing for the elderly. That figure includes independent-living and assisted-living communities, but not nursing homes.

The total value of senior housing deals in the quarter ended Sept. 30 was greater than the combined total in the previous two full years, according to the National Investment Center for the Seniors Housing & Care Industry in Annapolis, Maryland.

Philadelphia-based Brandywine Senior Living has participated in the consolidation frenzy. Brandywine, which had been owned by New York private equity firm Warburg Pincus L.L.C. since 2006, sold its 19 assisted- living facilities in five states in Dec., 2010, to Health Care REIT of Toledo, Ohio, in a deal valued at $600 million.

Brandywine Senior Living, now primarily a management company owned by chief executive Brenda G. Bacon and other executives, leased the facilities back and continues to operate them, including five in the Philadelphia area.

Brandywine, with 2,000 employees, is not standing still.

This fall, Brandywine, in partnership with Health Care REIT, bought five more assisted-living facilities in New Jersey, including the former Haddonfield Home in Haddonfild, for an undisclosed price and indicated that it would add more New Jersey locations soon.

Driving the consolidation in senior housing is the ability of real estate investment trusts to borrow cheaply in conjunction with the resilience of senior housing during the recession, giving investors confidence that strong returns will continue.

“The senior-living industry survived the pressure on real estate after Lehman Bros. collapsed,” said Bacon, 61, who cofounded Brandywine in 1996 with two nursing homes that she owned and $65 million in private equity.

Steve Monroe, editor of the trade newsletters SeniorCare Investor and Senior Care Acquisition Report in Norwalk, Conn., cited the relatively small drop in the senior housing occupancy rate during the real estate collapse of recent years as reason for its attractiveness to investors.

“It dropped from 91 percent to 87 percent,” Monroe said. “If you only dropped that much in the worst we can throw at you in 70 years, that’s pretty good.”

Author: Harold Brubaker,