Market Fundamentals and Trends in Senior Living National Investment Center (NIC) ALFA Annual Conference 2010
Agenda 1. Fundamentals, Insights and Trends Trends, Property Types, Rent Growth, CRE Comparison, Housing, Employment 2. Market by Market Evidence of the Bottom 3. What Has Changed? Occupancy Distributions, Rent Growth Distributions 4. Financing What Has Changed? Who Is and Is Not tlending? National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 2
Occupancy Has Declined Seniors Housing Occupancy, Supply and Demand Trends; MAP 31 5,000 Supply Demand Occupancy 93.0% Units Absorp ption & Invent ory Growth 4,000 3,000 2,000 1,000 0 1,000 2,000 92.0% 91.0% 90.0% 89.0% 88.0% 87.0% 86.0% Occupancy 3,000 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2005 2006 2007 2008 2009 2010 85.0% National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 3
And Across All Property Types 1Q07 to 4Q09 Occupancy Change by Property Type; basis points, MAP 31 0 CCRC Combined IL Freestanding IL Combined AL Freestanding AL 100 200 Basis Po oints 300 400 500 bps Change Since 1Q07 600 700 National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 4
Seniors Housing Rents Continue to Grow YOY Asking Rent Growth Trends; Sources: MBA Quarterly Data Book; PPR; NIC MAP 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Seniors Housing Office Multifamily 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 5
But at a Slower Pace Seniors Housing YOY Rent Growth; MAP 31 5% 4% IL YOY Rent Growth AL YOY Rent Growth 3% 2% 1% 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 6
Housing is a Driver of IL Demand IL Occupancy and Residential House Price Trends; Sources: S&P Case Shiller and NIC MAP 200 S&P/Case Shiller National Home Price Index IL Occupancy (Right Scale) 94.0% 190 93.0% 180 92.0% 170 160 150 140 130 91.0% 90.0% 89.0% 88.0% 120 87.0% 110 86.0% 100 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2005 2006 2007 2008 2009 2010 85.0% National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 7
Employment is a Driver of AL Demand AL Occupancy and Change in Employment; Sources: Bureau of Labor Statistics, NIC MAP; MAP 31 1,000,000 92.0% 500,000 91.0% 0 500,000 1,000,000 1,500,000 Q/Q Change in Total Nonfarm Employment AL Occupancy (Right Scale) 90.0% 0% 89.0% 88.0% 2,000,000 87.0% 2,500,000 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2005 2006 2007 2008 2009 2010 86.0% National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 8
Metro Level Declines are Far and Wide 1Q07 to 1Q10 Seniors Housing Occupancy Changes; basis points, MAP31 100 0 100 200 300 400 500 600 700 Houston, TX San Diego, CA Denver, CO Portland, OR Atlanta, GA Kansas City, MO Cincinnati, OH Seattle, WA Washington, DC San Antonio, TX Chicago, IL Philadelphia, PA Tampa, FL Los Angeles, CA Miami, FL Sacramento, CA Boston, MA MAP 31 Detroit, MI Phoenix, AZ Dallas, TX St. Louis, MO Pittsburgh, PA San Francisco, CA Riverside, CA Cleveland, OH Minneapolis, MN San Jose, CA Baltimore, MD Orlando, FL New York, NY Las Vegas, NV National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 9
Evidence of the Bottom YOY Change in All Occupancy (bps); Minneapolis 150 100 101 87 75 50 39 11 0 50 6 24 13 47 49 100 150 200 107 127 117 162 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 National Investment Center for the Seniors Housing & Care Industry www.nicmap.org
Evidence of the Bottom YOY Change in All Occupancy (bps); Miami 100 50 62 69 0 50 100 63 105 80 150 200 149 167 145 171 174 158 250 220 235 300 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 277 National Investment Center for the Seniors Housing & Care Industry www.nicmap.org
Evidence of the Bottom YOY Change in All Occupancy (bps); Detroit 150 100 101 87 75 50 39 11 0 50 6 244 13 47 49 100 150 200 107 127 117 162 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 National Investment Center for the Seniors Housing & Care Industry www.nicmap.org
Evidence of the Bottom YOY Change in All Occupancy (bps); Riverside 150 100 116 115 50 0 50 100 150 100 74 83 62 53 68 200 250 300 350 189 224 240 263 297 319 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 National Investment Center for the Seniors Housing & Care Industry www.nicmap.org
Evidence of the Bottom YOY Change in All Occupancy (bps); Tampa 200 150 100 50 133 118 0 50 100 47 47 5 150 139 134 120 200 250 300 209 207 241 259 250 256 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 National Investment Center for the Seniors Housing & Care Industry www.nicmap.org
The Occupancy Landscape has Changed Seniors Housing Occupancy Distributions; MAP 31 100% 90% 80% of Properties Perecent 70% 60% 50% 40% 30% 20% 10% 95 100% 90 95% 85 90% 80 85% 0 80% 0% 1Q07 1Q10 National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 15
Degrees of Metro Area Stress Percent of Seniors Housing Properties 80% or Less Occupied; MAP 31 Rank Markets with Lowest Share of Lowest Occupied Properties (based on 1Q10) 1Q07 1Q10 1 Minneapolis, MN 1% 6% 2 New York, NY 7% 6% 3 Tampa, FL 4% 8% 4 Boston, MA 1% 8% 5 Pittsburgh, PA 6% 9% Markets with Highest Share of Lowest Occupied Properties (based on 1Q10) 1Q07 1Q10 27 Las Vegas, NV 33% 24% 28 San Jose, CA 13% 26% 29 Chicago, IL 14% 27% 30 Kansas City, MO 16% 27% 31 Dallas, TX 18% 28% National Investment Center for the Seniors Housing & Care Industry www.nicmap.org
Not Raising Rents? Seniors Housing Rent Growth Distributions; MAP 31 Percent of Properties Rii Raising Rents 0 1% YOY Percent of Properties Rii Raising Rents 5% (or more) YOY 50% 45% 40% 35% 30% 25% 20% 15% 10% 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 17
National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 18
Financing Has Changed Annual Financing Flows; Source: Federal Reserve, f220 150 Commercial Bank Loans Commercial Credit Loans REITs CMBS 130 110 90 Billions of Dollars 70 50 30 10 10 30 2005 2006 2007 2008 2009 50 National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 19
But The GSEs are Still Lending GSE Total Multifamily (including Seniors) Mortgages Outstanding; Source: Federal Reserve 370 360 350 of Dollars ($ $) Billions 340 330 320 310 300 290 280 270 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 20
Seniors Housing Loan Volume has Slowed Annual Seniors Housing & Long Term Care Loan Volume; Source: NIC KFIs $9,000 $8,000 $7,639 Millions $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $ $6,280 $4,510 $4,034 $2,761 $2,924 2004 2005 2006 2007 2008 2009 National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 21
And SHC Construction Lenders are Not Lending Annual Seniors Housing & Long Term Care Construction Loan Volume; Source: NIC KFIs 450 417 400 350 Millio ons of Dollar rs 300 250 200 150 100 160 102 230 136 268 118 50 0 2002 2003 2004 2005 2006 2007 2008 2009 0 National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 22
And Other Banks Are Struggling Number of Troubled Banks; Source: FDIC 800 700 600 500 400 300 200 100 0 2005 2006 2007 2008 2009 National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 23
Defaults are Rising End of Year Default Rate for Commercial Mortgages Held By Banks Source: FDIC, Real Estate Econometrics 6% 5% 4% 3% 2% Projection Trend 1% 0% 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 24
Is Financing Available? Acquisitions Maturing Debt/Recapitalize Renovate/Modernize Construction National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 25
And on What Terms? Property Types Financed Appetite/ Liquidity GSEs IL, AL High (steady to declining) General Terms Max LTV 65 75%; DSCR 1.3+; Min 90% Occupancy; 5 25 Yr Term HUD SNF, AL High (steady to Max LTV 80 85%; 85%; DSCR 1.45+; Up to 35 Yr declining) Term; New Construction REITs All Medium (steady to increasing) 100% of Purchase Price; Generally 8.5%+ Lease Rate; Property Taxes Upon Sale Regional Banks All Low (steady) Construction, Bridge, some Permanent; 70% and Under Community Banks All Medium (increasing) i Commercial Credit $10 million Loan size, Look for participation i for Higher Amounts All Low (steady) Up to 85% LTV, 5 Yr Term Max, DSCR N/A, Some Recourse National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 26
Fannie and Freddie are In Business, For Now Annual Net Income; Source: Thompson Reuters $10 $0 $10 Billions $20 $30 Fannie Mae Freddie Mac $40 $50$ 0 $60 2006 2007 2008 2009 National Investment Center for the Seniors Housing & Care Industry www.nicmap.org 27
What to Look for in 2010 Seniors Housing Construction vs. Supply Growth; MAP 31 25,000 Number of Units Under Construction (Left Scale) Annual Inventory Growth (Right Scale) 3.0% 20,000 2.5% 15,000 10,000 2.0% 1.5% 1.0% 5,000 0.5% 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 00% 0.0% National Investment Center for the Seniors Housing & Care Industry www.nicmap.org