Americans are getting grayer — and that could be a windfall for senior housing. Two of the biggest beneficiaries of this trend are some real estate investment trusts, which also return income to investors, according to Morgan Stanley. The company favors Welltower, which has a dividend yield of 2.7%, and American Healthcare REIT, which went public on February 7 and yields 7.1%. They both own senior housing properties. About 18% of the U.S. population is currently over 65, and by 2060, the percentage of seniors is expected to rise to more than 23%, according to a Morgan Stanley analysis of Census data. As a result, the company estimates there will be 2.1 million residents in independent living, assisted living and skilled nursing housing in 2030, up from 1.7 million in 2022. This is based on a current penetration rate of 3% of seniors living in senior living. Housing, but this could increase as changes occur in the industry, economist Sarah Wolfe and a team of analysts and strategists wrote in a note last week. “Improving affordability and demand for a better quality of life, services and care are key factors,” they said. For example, active adult communities may change where seniors age by offering an affordable price point for those looking for a higher quality of life, but not necessarily medical care, the company said. “In fact, WELL has been a leader in aggregating active adult communities through its recent $1.0 billion acquisition of 3,900 units ($249,000/unit) increasing its existing and in-development Healthy Housing portfolio to approximately 25,000 units,” the team said. “. WELL YTD Mountain Welltower Year to date, the company sees the addressable market growing to 185,000 units in 2030 from 150,000 in 2022. Additionally, there is a growing need for senior care. Over the past four years, the proportion of older adults who reported their health as “fair” or “poor” versus “excellent,” “very good,” or “good” was 24%, while those who said they had difficulty coping With themselves, Medicare averaged 9%, Morgan Stanley said, citing data from the National Center for Health Statistics. “This number of seniors who may need high-quality services and care is much larger than the approximately 3.0% of seniors currently living in senior housing facilities,” the company's analysts said. Welltower has the highest income and real estate density in its market, the team said. They said American health care should see the largest operating uptick from senior housing facilities. AHR Mountain 2024-02-07 American Healthcare REIT since IPO on February 7 “AHR is our favorite small cap company because about 50% of portfolios are exposed to senior housing operating assets, where they can benefit from real estate cash flow upside (vs. Fixed escalators of 1-3%.) Analysts expect 10% growth in funds from operation in 2025 and 2026 for both names, well above the REIT average of 2% to 4%.
