Federal Reserve Trims Rates, Aiding Senior Living M&a, Construction Plans

The Federal Reserve on Wednesday cut interest rates by 25 basis points and signaled potentially more rate cuts to come this year. The move could spur more senior living lending and fuel M&A or construction growth plans ahead.

On Wednesday, the U.S. Federal Reserve lowered the target range for the federal funds rate by a quarter of a percentage point, down to 4% to 4.25%, according to a press release. At the heart of its decision was the fact that job gains have slowed and inflation has moved up and remains “somewhat elevated,” the release states.

“The committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run,” the U.S. central bank noted in an announcement about the rate cut. “Uncertainty about the economic outlook remains elevated. The committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen.”

The central bank hinted at rate cuts to come, and Powell said during a press conference Wednesday that the move amounted to some “risk management” in light of recent weak job reports.

Senior living M&A in 2025 has seen a “perfect storm” for activity through transaction volume reaching pre-pandemic levels, and even more are expected to close out 2025. Although some debt sources have come back to senior living construction, operators have told Senior Housing News that equity is still not coming to the table, leading to a record low rate of new construction this year.

The Fed’s latest decision may add some “lubricant” to the senior living dealmaking machine given high demand and low construction and could push some pending deals over the finish line, according to Lynn Jerath, founder and president of Citrine Investment Group.

“There’s more financing options, there’s more liquidity, there’s more capital availability and somewhat of a cheaper rate,” Jerath said. “It allows deals to get done that may or may not have gotten done otherwise.”

If the Fed “opened” a door with its talk of rate cuts, today investors and developers are “approaching the door” as conditions become more favorable to their growth plans. More rate cuts ahead will only accelerate that trend.

Since closing its first senior living transaction in 2023, Citrine has begun working with three senior living partners and expects to have four communities spanning 600 units, representing $150 million in assets under management, by the end of the year.

To that end, Jerath believes the Fed rate cut will aid the plans of companies like Citrine by lowering the cost of capital they can use to acquire or develop new properties. Lower interest rates also can help communities with floating-rate mortgages pay back debt maturities and get more favorable financing.

Given the changes today and the proposed additional drops through the remainder of 2025, Jerath believes there will be continued interest and capital entering the sector in the coming months.

“People following commercial real estate, everyone’s going to be talking about senior housing. It’s going to be the sector of focus, and you’re going to see a lot more activity and a lot of interesting deal flow,” Jerath said. “We have such a strong base of demand from the demographic side. So it’s a really exciting time for senior housing overall.”

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