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Cornell Real Estate Review

Abstract

Over the past 10 to 15 years the senior living industry has grown to become a $315 billion nationwide business. This has spurred the development of healthcare focused real estate investment trusts (REITs) and large-scale senior living operators (REOCs), thus, beginning to consolidate a fragmented industry. In contrast with other real estate sectors, the REITs and REOCs are aligned or partnered with each other due to the vital focus on operational capability. They are also partnered because growth in senior living requires acquisitions of existing senior living businesses. While the large-scale operators bring their managerial expertise, the REITs bring their access to capital with which to acquire smaller operators. Despite the strong levels of growth, in the last few years, healthcare real estate is seen as a sub-sector within the core real estate sectors. With healthcare trading at the highest price to net asset value (NAV) of any real estate sector (or sub-sector), many investors and real estate professionals are still catching on to the idea of senior living as a highly profitable real estate investment area. It is likely the heavy operational focus (and subsequent risk) deters more real estate firms from entering the space.

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