Many buyers prize a community’s cash flow over other factors. If a community is already making money, and avoids any major missteps, it is probably a safe bet for investors. Neither 2015 nor 2016 reached the record average NOI per unit set in 2014 of $14,200 per unit, but in a year when the average price per unit for seniors housing (including both independent and assisted living) increased, it makes sense that NOI per unit would increase in turn, by $500 per unit from 2015 (11,700 per unit) to 2016 ($12,200 per unit). Separating it out by sector, one would think that if independent living prices rose by $35,300 per unit, or 18%, one would see a corresponding increase in the NOI per unit for the properties sold. And for the smaller 2% increase in assisted living prices, one would expect a smaller increase.

However, driving up the NOI per unit was the assisted living sector, which accounted for eight of the nine highest NOIs per unit of 2016. The average NOI per unit for assisted living increased by 6%, while it decreased 8% for independent living. So, IL communities making less money sold for higher prices in 2016. One possible explanation is the growing sales of larger independent living communities, which are priced high but may not earn more NOI per unit than smaller properties. We’ve been saying interest has been much higher for AL properties than IL. This would be a pretty compelling reason for investors.