Over the next 10 years, the baby boom generation will start to reach retirement age. As a result, the demand for senior housing will increase significantly. Since 2008, the senior housing market has suffered from a lack of liquidity in the capital markets. Subsequently, capitalization rates are higher than other asset classes, making the cost of acquisition of senior housing properties remains relatively low.
Many independent operators have been unable to sell their properties due to the illiquidity in the market. Sterling will acquire targeted properties based on “in place” revenues which, at current cap rates, result in acquisition prices significantly below replacement cost. Sterling seeks “off market” acquisition opportunities for properties in strong markets. We look for curable challenges resulting from existing management issues, operational inefficiencies or financial challenges due to existing ownership’s capital structure.
The Sterling team has a track record of taking under performing properties and turning them around, creating success stories and high performing assets. The combination of favorable demographics and an illiquid market make this a great time to acquire senior housing properties.