Average skilled nursing facility cap rate falls

A couple of weeks ago, we discussed the fall in the average skilled nursing facility cap rate by 60 basis points to 12.4% (according to the 2015 Senior Care Acquisition Report, just recently published). For assisted living, we saw an even larger fall of roughly 90 basis points to 7.75%. The downward trend is not surprising, as AL cap rates have steadily declined since the Great Recession, but the extent of the fall was. In this market of higher and higher valuations plus abundant (and cheap) capital, buyers are looking to pay more for quality assisted living communities, even if that means pricing out operating risk somewhat, because margins aren’t changing all that much, at least not that we’ve seen.