Every year in our Senior Care Acquisition Report, we try to determine what a market “portfolio premium” would be for assisted living communities, with a portfolio including three or more properties. However, just because there is a portfolio of properties, it doesn’t always mean that the buyer will pay more for them. The premium has to do with both the number of properties as well as the quality. In most years, there is a sizable difference in the average price per unit for portfolios compared with smaller purchases. In 2016, we recorded a drop in the premium to $45,700 per unit, or a 4% drop from 2015’s $47,600 per unit premium. Both premiums fall short of the record ($69,000 per unit in 2012). The price for an assisted living portfolio increased 8% from $206,000 per unit in 2014 and 2015 to $223,200 per unit in 2016. However, what impacted the decline in the premium was the unprecedented rise in the price for single community sales. Averaging $172,700 per unit in 2014 and $158,300 per unit in 2015, this value spiked to $177,400 per unit in 2016. Evidently, the caliber of those single properties rose significantly.
With portfolios still commanding premiums, at record-high levels in 2016, we have to wonder what is in store for 2017, with rumors (and in some cases, more than rumors) of a few Chinese investors interested in making some big investments in the U.S. seniors housing market. The most high-profile target is, of course, Brookdale Senior Living. But given the company’s problems have partly been due to its size, we are not sure what kind of premium its portfolio would command, and most likely, none at all. If a deal comes, however, that will be for the buyer to decide.
