The tone at this year’s NIC Spring Conference was noticeably more positive than the past couple of years. While capital is abundant, most groups remain cautious. The focus has shifted back to fundamentals such as operations, real demand, and disciplined underwriting, as the gap between high-quality assets and alternative property options continues to widen.

 

Capital Markets

Capital availability in today’s market has increased, particularly from private equity and institutional groups raising new funds; however, deployment remains selective.

 

Most Buyers are focused on: 

• 80-150+ unit deals
• Assets that can qualify for agency financing
• Markets with strong demographics and housing fundamentals
• Deals with a clear value-add story

The rise in direct recapitalizations involving existing investors underscores sustained long-term confidence in the sector. Newer vintage Class A assets continue to attract highly competitive bidding, with final-round offers exceeding initial bids by 10%+ for select properties.

 

Investment Strategy

There is a clear bifurcation in today’s market. 

 

On one side, value-add buyers are targeting older assets that allow them to drive NOI through leaseup, expense control, or repositioning. These groups continue to target higher returns and shorter hold periods in their underwriting. On the other side, core and core-plus capital is focused on newer, stabilized assets with durable cash flow, seeing as these investors aren’t opposed to longer hold periods and prioritize consistency over upside. This divide continues to drive a widening pricing spread between stabilized and transitional deals.

 

Independent Living

Independent Living is seeing renewed interest where fundamentals are strong. Most groups still prefer IL as part of a broader continuum, though standalone IL can work in the right markets.

 

What Matters Most:

• Strong home values in the surrounding area
• Above-average household incomes
• Real depth in both the senior population and the adult children cohort

 

Development

While development activity remains limited, it’s beginning to re-enter the conversation. A small number of groups are planning new starts over the next 12–18 months, primarily in stronger MSAs.

 

That said, most investors continue to favor acquisitions of existing assets, where risk is more readily underwritten. New development will likely remain measured until greater clarity emerges around construction costs and lease-up velocity.

 

Operators

Operator performance continues to be a key determinant in deal execution. Investors are spending more time underwriting the operator than they were a few years ago. In addition, there is greater flexibility around partnership structures, with many investors taking an operator-agnostic approach and choosing best-in-class regional partners on a deal-by-deal basis.

 

Margins in the mid-to-high 20% range are generally viewed as realistic today with select best-in-class operators achieving 30%+ operating margins.

 

Geography

Sunbelt markets attract the most attention, particularly Texas and Florida. Concurrently, the Northeast has posted record-breaking comps, demonstrating continued demand for core product. Population growth and housing trends are the main drivers in these markets.

 

At the same time, investor interest is expanding into select secondary markets where affordability and home equity levels support private-pay demand. The Midwest remains active, typically offering higher yields, though rent growth is expected to trail coastal markets.

 

Deal Structure

A range of capital structures is being utilized, depending on the strategy. Value-add deals are often capitalized on a per-deal basis, while stabilized portfolios are increasingly recapitalized or rolled into longer-term investment vehicles. LP-operator, joint venture partnerships maintain popularity and will continue to expand into the foreseeable future.

 

Hold periods and pricing are also extending for higher-quality assets, with some groups underwriting 10+ year ownership.

 

Key Takeaways

While capital has returned, discipline remains a defining theme. Investors are increasingly focused on quality, both in assets and operators, as the gap between stabilized and valueadd deals widens. Demand continues to be supported by demographics and home equity, with Independent Living gaining traction in select markets and development slowly re-entering the pipeline.

 

In this environment, those prepared to move proactively have a clear opportunity to secure high-quality assets ahead of broader market re-pricing.