Recently I got to talk with Grant Kief of Senior Living Investment Brokerage about what 2008 will bring for both buyers and sellers in the seniors housing market.

You can click here to listen to the interview (5 minutes), or read the transcript below.

Steve Monroe
We’re sitting here today with Grant Kief, president of Senior Living Investment Brokerage, a seniors housing brokerage company, with three offices across the country.

Grant, you have been representing sellers of seniors housing assets for many years.  How would you characterize the last few years?

Grant Kief
The last few years, Steve, it’s been gangbusters.  We have grown from about five or six brokers three years ago; we currently have 13 or 14 brokers.  And we have probably tripled the number of transactions and the dollar volume, as well.  It’s been very good to us.  I think that we’ve grown along with the market.  It’s been, with the demographics in our favor, very good to us.

Steve Monroe
Good.  Did you notice any change in the atmosphere in the market during the first half of the year, before the summer credit crisis?

Grant Kief
No, we probably have more deals under letter of intent and contract now than we did in the first half of the year.  It continues to be strong.  We focus on the mom-and-pops, the smaller facilities, the ones, the twos, and it remains a very good, strong market.

Steve Monroe
Did your company have any transactions in the last couple of months, probably since August 9th, that couldn’t close because the lenders backed off after the summer?

Grant Kief
I don’t think we’ve had any, Steve.  I don’t think any of our transactions have been nixed because of lenders.  We dodged that bullet.

Steve Monroe
That’s good.  Now you said a lot of facilities are under contract right now. Is your fourth quarter going to be a record for you?

Grant Kief
We have about 34, 35 deals under letter of intent or contract.  If they do close, it would be a record for us.  Some of them will fall into early next year, first quarter next year.  But yeah, I think that we’ll definitely have a better year than we did last year, in number of transactions, and also dollar volume.

Steve Monroe
Is there any geographic concentration in these sales?

Grant Kief
Originally, we were a Midwest firm, basically the Great Lakes.  We have grown coast-to-coast and I don’t think that the buyers or the sellers concentrated on any one area geographically or avoided any area.  So, no, I would say it’s pretty much across the board.

Steve Monroe
Okay.  And have the sellers reacted to what certainly appears to be a new market environment?  Are they living in the world of yesterday’s cap rates and leverage or are they acknowledging there’s been a change, whether it’s temporary or not?

Grant Kief
Well, there’s certainly a lag between buyers and sellers.  The buyers react much more quickly than the sellers do.  So there is a little bit of a difference right now in expectations.  The sellers still have yesterday’s expectations, but the buyers are starting to get on board and it’s an education process for us, as well.  A lot of times we have to educate the sellers that it’s not the market it was, even from a month ago, when they’re reading last month’s SeniorCare Investor or the month before.

Steve Monroe
And how are the buyers pricing acquisitions in today’s market?  Are they using the cap rate on trailing 12-month cash flow, pro forma cash flow, IRR?  In 2005 and 2006, it was pro forma one and two years.  Has that changed?

Grant Kief
Yes, it has changed.  It’s definitely on the cap rate on the trailing 12 months right now.  And it’s a 25 to 50 basis points change from what it was three, four months ago.

Most of our buyers are using local lenders.  And that allows them to have relationships, the lender knows them, knows what they can do with the property and so we’re seeing deals continue to get done.

Steve Monroe
What advice do you have for buyers in this market?

Grant Kief
Keep the faith and keep buying.  Keep the economy going.

Steve Monroe
How about for sellers?

Grant Kief
Sellers, I think it continues to be a good time to sell.  We’ve got great, all-time record low interest rates, we’ve got the demographics in our favor.  I think it continues to be a very good time to sell, especially since most of the deals that we have under letter of intent or contract I believe [they will] close, most of the properties that we have listed, we are getting multiple offers on them.  And I think it’s a great time to consider selling.

Steve Monroe
All right, well, Grant, thank you for sitting with us today and good luck on all the closings in the fourth quarter.

Grant Kief
Thank you.