Strategic Trust Announces New Valuation for Housing Portfolio
The trust emphasizes transparency in its recent asset valuation, revealing shifts in property value and portfolio composition.
January 15, 2025
Strategic Student & Senior Housing Trust, Inc. (SSSHT) has updated its estimated per-share net asset value (NAV), revealing changes in its senior housing property valuations and an evolving portfolio structure. The valuation, assessed by independent firm Kroll, LLC, underscores the trust's commitment to compliance with industry guidelines and regulatory requirements. This development follows a broader trend of increased scrutiny in real estate investment trusts (REITs) amid changing market conditions.
Asset Portfolio Update
SSSHT reported a per-share NAV of $6.35 as of September 30, 2024, reflecting a slight increase compared to the previous year's $6.34. The change primarily stems from its senior housing portfolio, valued at $203.1 million, marking a 12.5% increase from the original acquisition cost of $180.5 million. The absence of student housing assets this year signals a pivot in the trust's focus.
Kroll's valuation methods included a discounted cash flow analysis, emphasizing projected cash flow streams and terminal values. The firm used an 8.5% to 8.75% discount rate and a 7% to 7.25% terminal capitalization rate to derive property values. Additional support was provided through a sales comparison approach.
Changes in Liabilities
The trust reduced its total liabilities to $138.2 million, a notable decrease from $190.8 million in the prior year. This reduction includes a fair valuation of debt at $103.2 million, representing a below-market adjustment of $1.9 million. Accounts payable and accrued expenses also declined, contributing to an improved financial position.
Strategic Focus and Market Position
SSSHT’s shift in asset composition, marked by the divestment of student housing properties, highlights a more focused strategy on senior housing. The trust's current holdings comprise four senior housing properties, appraised using updated valuation metrics. The move aligns with broader market trends favoring demographic-driven real estate investments.
Further, the trust emphasized that its NAV calculation adheres to industry standards set by the Institute for Portfolio Alternatives. While the NAV reflects a stable outlook, management cautioned that future valuations could fluctuate due to economic shifts and market volatility. Key assumptions like rent growth rates, operating expense margins, and capitalization rates were carefully reviewed to ensure accuracy.
Looking Ahead
Despite minor adjustments in per-share NAV, SSSHT maintains a robust financial standing, with improved liquidity and reduced liabilities. The trust plans to provide annual updates to its NAV, ensuring transparency for investors and compliance with regulatory standards.
With its streamlined focus on senior housing and ongoing commitment to valuation rigor, SSSHT positions itself as a stable player in the evolving real estate market.
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