Capital One Updates: Highlights Senior Housing Finance Opportunity

According to a Capital One (NYSE:COF) real estate executive, there is ample room for growth in the senior housing industry and Capital One intends to take advantage of the opportunity. ^[1] Although the overall housing market in the U.S. remain weak amid high unemployment and slow economic recovery, the senior housing sector, driven by investment companies, has been booming since 2010. About 39 senior housing deals worth $5.5 billion were completed in the third quarter of 2011, which was greater than the combined total in the previous two full years. ^[2] Capital One with its strong balance sheet and capability to lend could give a tough competition to Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC) and JPMorgan (NYSE:JPM).

We have a price estimate of $57.88 on Capital One’s stock, about 30% above the current market price.

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The senior housing market is primarily ruled by real estate investment trusts that specialize in housing for the elderly but high demand for senior housing means that lenders such as Capital One can also participate in the growth story. Capital One is likely to pursue deals between $5 million and $100 million in skilled nursing, assisted living, independent living and continuing care retirement facilities. Capital One’s mortgage loans portfolio has grown by over 15% per year in the last three years and we expect to reach about $21 billion by 2018 from its current value of about $16.4 billion.

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1. Capital One Exec Points to Bank Opportunity in Senior Housing Finance, Senior Housing News, Dec 1, 2011 [↩]
2. Senior-housing market booms, Kansascity, Dec 1, 2011 [↩]