What is the premium paid for memory care in today’s seniors housing acquisition market? We have noticed in the last two cycles that at the beginning of the bull markets, traditional assisted living is typically priced higher than communities with a memory care component, then the reverse is true as the bull market strengthens or hits its peak. And given the extraordinarily high values we saw in 2014, we may have already been to the mountaintop. Accordingly, buyers paid a significant premium for assisted living with a memory care component, with $215,100 per unit compared with $138,500 for traditional AL in 2014 (according to the 2015 Senior Care Acquisition Report).

What is interesting is that the premium paid in 2014 ($76,600) was 233% higher than in 2013, which stood at a premium of just $23,000. What could be driving memory care prices up so high? Well, they have been filling up faster and stay occupied. Indeed, occupancy for AL/MC was 400 basis points higher than traditional AL, 88% compared to 83%. Also, a majority of the memory care units have been built or added to assisted living communities more recently, coming with a steeper price tag as a result. However, these higher valuations could spell trouble for the Alzheimer’s/dementia care industry, with development heating up. Maybe too much.