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Once a niche alternative investment, the seniors housing marketplace has proven to be a reliable performer that is drawing greater interest from a broad swath of debt and equity capital providers. Yet, seniors housing is a unique category of real estate because of the complexity of its operating business. Successful deals require an understanding of both the various capital structures available and the issues facing seniors housing today, including the skilled labor shortage and the incoming middle-income senior cohort who will need more affordable housing options.

At the 2019 National Investment Center for Seniors Housing & Care (NIC) Fall Conference, KeyBank Real Estate Capital® executives participated in panel discussions about how deals are being constructed in the seniors housing marketplace. Following the conference, they shared their perspective on what seniors housing investors should know.

The key takeaway? Despite headwinds, plenty of activity lies ahead for an increasingly institutionalized seniors housing sector.

Understanding Debt and Equity Capital Sources & Valuation

Over the past decade, seniors housing has shifted from “mom-and-pop” individual owner operators to a viable institutional investment. It now draws interest from capital sources as diverse as bank and bridge lenders, real estate investment trusts (REITS), hedge funds, equity debt funds, pension and insurance funds, and commercial mortgage-backed securities (CMBS). New debt and equity providers continue to enter the space, increasing competition and introducing varying structures and pricing.

The Federal Housing Authority (FHA), the U.S. Department of Housing and Urban Development (HUD), and the government-sponsored enterprises, Fannie Mae and Freddie Mac, are also very active in financing seniors healthcare deals. According to Grant Saunders, senior vice president, KeyBank Real Estate Capital, the agencies’ lending caps had made them more stringent about their deals than other sources of capital.

On the heels of the NIC conference, new lending capacity guidelines were issued by the federal government, and both agencies have abundant capital to lend in the space. Matt Ruark, SVP, Head of Commercial & Healthcare Mortgage Production, added that, “Seniors housing also aligns with the agencies’ mission-driven lending mandate.”

Along with the widening of the investor pool, a number of factors are impacting valuation in seniors housing, including:

  • The availability of high-leverage deals that also come at a higher cost
  • The supply in primary versus secondary markets – some markets have been overbuilt and have yet to realize the demand
  • Whether a property is in lease-up mode and the projected duration
  • Weighing redevelopment cost versus new construction –– especially with construction costs rising and existing properties holding their value
  • Whether an owner-operator will have an equity stake in the deal – these deals tend to be more attractive for bank and agency lenders because of trusted, existing relationships

On his panel, Charlie Shoop, KeyBank Real Estate Capital senior vice president, healthcare mortgage banking, noted that partly due to increased competition, capitalization (cap) rates are likely to remain flat.1 New entrants to the seniors housing space may not fully understand the risk with the operational component and how it impacts return hurdles.

In a Shifting Marketplace, Seniors Housing Owners Must Rise to the Occasion

With interest rates falling and the yield curve inverting, capital markets are volatile. Seniors housing is somewhat correlated to broader economy, but the effects of volatility are more muted because of senior housing’s necessity. During the last downturn, seniors housing and healthcare outperformed other types of real estate. However, at the conference, Beth Mace, NIC chief economist, noted that signs of a downturn were mounting, and while seniors housing is “recession resilient” it is not “recession proof.”2

In the current environment, owners are balancing good and bad news. On the positive side, seniors housing occupancy rates are strengthening. According to recent NIC figures, third quarter 2019 set a record for greatest net new unit demand.3 With a potential construction slowdown ahead, existing properties should see continued occupancy growth, especially as more of the baby boomer cohort age in. As far as challenges, amid a tight labor market, seniors housing operators are also contending with rising costs to hire and retain skilled healthcare workers.

Finally, providing more affordable seniors housing is a mounting concern that will need effort from owners, investors, lenders and the federal agencies to address. According to research presented by NIC, over 14 million middle-income seniors, age 75 or older, will be in the marketplace by 2029. More than half of these middle-income Americans are not expected to be able to afford housing, including independent living, assisted living, memory care, skilled nursing and post-acute care facilities.4 New models must emerge, where the care and services needed by middle-income seniors will be delivered cost-effectively and with new financial structures to fund them.

KeyBank: Your Connection to Relationship-Driven Deals

Even with new capital providers taking an interest in seniors housing, most deals are built on the strength of relationships. With operations a factor in valuation and getting deals done, it’s important to work with lenders who understand this specialized industry. As one of the nation’s leading lenders in the seniors housing sector, KeyBank Real Estate Capital’s integrated team delivers debt, equity and advisory services and arranges permanent healthcare property financing, syndicated loans and agency financing.

To learn more and discuss your next seniors housing project, contact your KeyBank Healthcare Finance Manager, or reach out directly to: Matt Ruark, Grant Saunders or Charlie Shoop.



  • Seniors housing’s strong fundamentals make it an attractive investment for a range of debt and equity investors.
  • Because seniors housing has a complex operating component, deal partners should understand how that can impact returns.
  • New lending capacity guidelines mean the federal agencies have abundant capital for the seniors housing marketplace.
  • Cap rates are likely to remain flat in the seniors healthcare sector.
  • Seniors housing occupancy is strong, but operating costs are rising.
  • Public and private investment will be needed to address the growing middle-income senior cohort.

Obando, Sebastion. “Seven Takeaways from the NIC Fall 2019 Conference: Day 2.” National Real Estate Investor, 9/13/19.


Mullaney, Tim. “Former Fed Chair Yellen: Senior Housing Could Feel the Pain of ‘Root Canal Economics’” Senior Housing News, 9/9/12.


NIC. “Seniors Housing Occupancy Strengthens Nationwide in Third Quarter 2019,” 10/10/19.


NIC. “The Forgotten Middle: Middle Market Seniors Housing Study.”