— By Blake Bozett, founder and CEO, The Zett Group —
The Boise metro (Boise, Eagle, Meridian, Garden City) is made up of 75 licensed assisted living facilities, 42 of which have more than 30 licensed beds. Of those 42 assisted living facilities, the ownership type is made up of: national owner/operator (18), local owner/operator (12), REIT (4), regional owner/operator (3), local development company (2), privately held real estate investment firm (1), 1031 investment platform (1) and non-profit (1).
These ownership stats aren’t necessarily unique to other metros such as Seattle and Portland with institutional capital typically owning a large share of the buildings. What’s interesting to me on a micro level is that the single asset, one to two off owners are more interested in selling than years past. What started as a simple mom-and-pop operating business a few decades ago has turned into a sophisticated and challenging operating business with extreme expense, inflationary and regulatory pressures. Having come from the operations side of the business I’ve seen many of these challenges firsthand. Therefore, it no surprise why the local owner who has owned his/her assisted living facility for 20 years may have greater appetite for selling despite less favorable pricing compared to 12 months ago. What you will continue to see into the foreseeable future is much consolidation with the larger, more regional players acquiring the smaller and more local outfits that run a tight and clean operating business. Unfortunately, for the sellers that have old, tired buildings and that are heavily subsidized through Medicaid, I don’t see a bright future ahead. As these assets turnover, you will see investors reposition these buildings to multifamily or independent living as the price per unit is significantly lower than distressed multifamily.
While much consolidation will occur industry wide, I believe 2024 is extremely bright for buyers in the senior housing space. This is a very rare and opportunistic time where the bid ask spread will tighten and allow for more deals to get done. Some of the largest and well-known names in the industry will take advantage of the billions of dollars of debt maturities in 2024, utilizing their unique cost of capital as a competitive advantage. Outside of the institutional groups, you will see many new entrants in the senior housing space from alternative asset classes. One thing everyone can agree on is the favorable demographics ahead, so regardless of inflationary pressures, higher expense margins and a turbulent debt market there is extreme demand across the healthcare continuum for the years to come.
New Entrants to the Boise market
Avista Senior Living made a splash with the purchase of several buildings in Idaho including Avista Garden City and Spring Gardens Meridian. These acquisitions make sense considering their presence in the Washington and Utah markets with Boise serving as a near halfway point between the two.
Gold Stream Retirement also entered the market with the new development of The Pointe at Meridian.