June 2, 2015. 60 Seconds with Steve Monroe.
A recent survey concludes that cap rates will not be decreasing this year, but expectations were lower than in the previous year…
Senior Living Valuation Services just released the results of its annual survey regarding cap rates. Based on 62 surveys returned, the decline in what the respondents believe cap rates will do in the next 12 months was larger than in previous years. This is surprising, because cap rates declined significantly in 2014, according to our statistics, so we would not expect a meaningful change this year. The difference is that our stats are based on actual deals, compared with what the respondents think will happen in the market. For licensed assisted living, the adjusted range in expected cap rates was 6.5% to 8.5%, with an average of 7.4%, or 60 basis points below the 2014 survey number. For skilled nursing facilities, the adjusted range was 11% to 13% with an average of 11.8% and a 30 basis point drop from 2014. Average cash on cash return expectations for assisted living were 11.6%, and 15.5% for skilled nursing, but higher for subacute SNFs, as they should be.
