3 minute read time
November 25, 2021

Renaissance seems an odd word to use when describing seniors housing, but that’s exactly how CBRE’s Mathew Burnett characterizes the turnaround that Canadian seniors housing sector has experienced following an extremely difficult year fighting COVID-19.

The sector is on pace to have its best period ever for investment, with $4.6 billion in Class-A portfolio trades set to close over the next two quarters. That two-quarter volume is poised to match the all-time annual investment volume of $4.6 billion reached in 2015.

Typically, the annual volume of seniors housing investment in Canada is somewhere in the neighbourhood of $1.7 billion. This means the sector could see twice that volume in half the time over the next two quarters, and the momentum shows no signs of slowing down.

“In spite of the negative press surrounding seniors housing at some points during the pandemic, there has been a total renaissance in the sector this year,” says Burnett, Senior Vice President, Healthcare Capital Markets. “More than ever, investors are aware of the need to care for aging baby boomers and the time to execute a real estate strategy is before the demographic wave swamps the system.”

Hefty capital backlog

The resurgence is due in part to a hefty backlog of capital in search of opportunities and big players, especially American operators, who have massive amounts of capital to deploy. Canada’s largest seniors living operator, Chartwell Seniors Housing REIT, has a market capitalization of $3 billion; U.S. giants Ventas and Welltower have market caps of ~ $22 billion and $40 billion, respectively.

Want proof of how attractive Canadian seniors housing is right now? Blackstone Real Estate Group—the biggest real investor in the world—entered the Canadian seniors housing market this past July, creating a joint venture with Selection Group to acquire a portfolio of 13 seniors’ housing residences in Quebec comprising 3,548 units. The deal also includes a 300-plus-unit property in Montreal.

More recently, Ventas acquired the Hawthorn Senior Living Canadian portfolio, a deal brokered by CBRE.


"Cap rates on seniors housing product can be as high as 6.0%. That’s unbelievable yield in this environment."

Joining the fray have been other institutional investors flocking to the seniors housing sector in search of yield, which can be nearly double that of marquee asset classes like industrial, apartments and office. Cap rates, a measure of investment return, hover around 3.0% for those assets, while cap rates for the high-quality seniors housing product can be as high as 6.0%.

“That’s unbelievable yield in this environment,” says Burnett. “There is nothing the sector can go through that is worse than COVID and the industry is rebounding strongly from that. Investors now see seniors housing as a desirable defensive investment that also offers a lot of growth potential.”

Increased foreign competition

U.S. players first entered the Canadian market in 2012, when Welltower (then called HCN) partnered with Chartwell to acquire the 42-property, 8,200-unit Maestro Senior Living portfolio, a deal brokered by CBRE, and the first billion-dollar senior living transaction in Canada.

While having paused its Canadian investment activity in recent years, Welltower is now among the U.S. health care REITs showing renewed interest in Canada. This is putting Canadian groups, typically more conservative with investment strategies and pricing, on notice. A recent portfolio sale saw three American groups in the second round of bidding.

“Increased foreign competition is keeping domestic groups on their toes, but aggressive pricing isn’t the biggest challenge facing the sector,” says Burnett. “It’s the supply-demand imbalance that is the chief concern.”

Rising construction costs—exacerbated by pandemic supply chain issues—have forced groups with development plans to scale back or cut seniors housing projects altogether. “There is cause for serious concern if supply can’t be built fast enough to accommodate our aging population,” says Burnett.

“COVID has focused investor attention on this important service and it’s made the demographic wave feel closer, and more pressing, than ever.”

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