KMF SENIOR HOUSING INTELLIGENCE
Vol. 2. No. 2- October 16, 2002
IN THIS ISSUE:
- STABILIZED CONGREGATE INVESTMENTS CONTINUE TO OUTPERFORM
- WILL THE DEMAND FOR SENIOR APARTMENTS AND CONGREGATE
PROPERTIES EXPAND IN THE NEXT 3-5 YEARS?
- INVESTMENT EDUCATION NEWS
Stabilized Congregate Investments Continue To Outperform
Unlike the assisted living segment
(which has many good opportunistic plays), the congregate
segment (one type of independent living property) continues
its excellent financial performance. Due to the consistent
4% increases in rent and the operating leverage available,
stabilized properties continue to produce 5.5% to 7% increases
in NOI for institutional quality properties.
These increases in rent continue to occur in spite of some
softening in occupancy. This demand inelasticity was discussed
at length in Volume
One - Issue Three and in our opinion, makes these investments
particularly compelling when coupled with the fact that they
move differently than office, retail, industrial and multifamily
investments.
We recently reviewed updated financial information from
one of the top congregate operators in the field and the 2001
results were impressive. The NOI growth for stabilized properties
was 7.75%. Over the last 5 years, it has averaged 7% per year.
In addition, the best industry survey, which is entitled,
"State of Seniors Housing 2001", by the American
Senior Housing Association, shows the median current return
on investment (unleveraged) was 14.4% for congregate properties
compared to 8.4% for assisted living properties. Even more
impressive was the upper quartile results. The upper quartile
congregate property produced a 20.6% current return on investment
(unleveraged) compared to 12.0% for assisted living. In fairness,
the assisted living properties had not been operating as long
as the congregate properties, but it still demonstrates the
substantial cash flow available from growth in NOI of the
"average" congregate property.
Moral of the story? Long term holders of congregate properties
have experienced excellent investment performance.
Will The Demand For Senior Apartments And Congregate Properties
Expand In The Next 3 - 5 Years?
In Volume Two - Issue One, we discussed
the reasons why demand in these independent living sectors
will continue to increase at yearly rates above the demographic
growth rate. Basically, in areas of the country where they
have been established longer, there is a much higher penetration
or proportion of seniors living in these types of properties
compared to the national average. The most recent issue of
the National Housing Survey further supports this position
of increasing demand, as there was a tripling of the number
of senior households who've made the decision to move to a
retirement community in the future. See chart below.
Source: NIC National Housing Survey
Investment Education News
- The National Investment Center
for the Seniors Housing and Care Industries ("NIC")
has just released its 2002 Lender and Investor Survey (including
a new feature on equity investor requirements). This is
required reading for all financial and investment professionals
within the field. For those of you actively studying this
investment segment, we would be pleased to provide you with
a complimentary copy.
- KMF Senior Housing Investors will host its third annual
Senior Housing Investing Seminar on Saturday, February 8th
at the Wyndham Buttes Resort in Phoenix, AZ. If you would
like to attend this seminar, please contact us.
For further information on articles in this briefing
or on any aspect of investing in senior housing, please
contact Jim Smith at
312-993-7800 (smith@kmfseniorhousing.com)
or visit our website http://www.kmfseniorhousing.com
Senior Housing Intelligence is published by KMF Senior Housing
Investors, L.L.C., 100 N. Riverside Drive, Suite 2300, Chicago,
IL 60606 312-993-7800
|
