Update of 6/30/2016: The REITs have slowed their market activity in 2016 due to interest rate uncertainty, slumping share prices and concerns about the SNF market in general per the CBRE “Senior Housing Market Insight” report for the first quarter of 2016.  Per the report, traditionally REITs have represented the majority of transaction volume, but in Q1 2016, only 15% of the first quarter 2016 volume involved a public buyer (REIT).  Private equity buyers have, however, increased their presence and now account for 55% of transactions in the first quarter of 2016.

Original October 5, 2015 post: This Firm has historically handled ten times more healthcare acquisitions than sales in our years of practice.  We didn’t do the math, but if the ratio is slightly exaggerated, it isn’t by much.   A couple of years ago, we handled a transaction for a client who was approached by a REIT for the sale of almost its entire SNF and ALF portfolio for $110,000 per bed or unit.  My client wasn’t looking to sell, but the REIT gave us various reasons it needed to increase its healthcare presence.  As part of the purchase agreement, the buying REIT negotiated the operational transfer items typical in a healthcare transaction because it did not have an operating tenant until a week before the closing.  The REIT has now sold the portfolio to a much larger publicly traded company, which we hear is having issues with the tenant because the tenant cannot afford to pay the rent required to support the purchase price.  This is not an isolated incident.  Many smaller SNF and ALF owners are aware of these transactions and believe they should also receive $100,000 per bed for their properties, which would otherwise appraise at $40,000 per bed on a sunny day by a blind appraiser on the day after his favorite NFL team won the Super Bowl.  Although our client was able to find replacement properties for the homes it sold, many of our other clients cannot because of the unrealistic prices being asked by sellers.  Prices will adjust back in a few years after these new tenants default on their renegotiated leases and the REITs and publicly traded companies realize they cannot obtain the rents required to support the purchase prices.  Until then our apparent ever lasting supply of acquisition transactions has slowed.