Valuations Remain High Across Senior Care Spectrum

Average prices for the four quarters ended June 30 dipped a little but most remain higher than calendar year 2015. Cap rates are slowly rising.

Earlier this month, we reported that the seniors housing and care M&A market, based on the number of transactions announced in the second quarter, as well as the first six months of 2016, was ahead of last year, but not by a large margin. It was the dollar amount of those transactions, however, that has declined because of the dearth of the large sales.

Now we have come out with our rolling four quarters data, and the results are not surprising. The conclusion is that based on valuations, the market remains relatively strong. In the skilled nursing sector, for the 12 months ended June 30, 2016, the average price per bed was $84,600, as small decrease from the $85,900 per bed in calendar 2015 and the $85,500 for the 12 months ended March 31. The average cap rate was 12.2% for the most recent 12-month period, identical to calendar 2015 but up from the record low of 11.9% for the 12 months ended March 31.

In the assisted living sector, average prices dropped by just over 2% to $184,900 per unit compared with $189,200 for calendar year 2015. Average AL cap rates have been slowly increasing, from 7.7% in 2015, to 7.8% for the 12 months ended March 31 to 8.0% for the 12 months ended June 30. Not large increases, but with interest rates still low, noticeable.

In the independent living market, the average price per unit dropped a bit from the March 31 period, but at $238,900 per unit is still much higher than the $192,900 per unit in calendar year 2015. And like the assisted living market, the average IL cap rate has increased by 30 basis points since last year, edging up to 7.3% for the 12 months ended June 30, compared with 7.0% in 2015.

These trends, as I said, were not surprising, and even though interest rates hit new lows a few weeks ago, that may not have much of an impact on cap rates, at least in the short term. We hear, however, that those true “A” senior living properties can still go for cap rates as low as 5.5%. The problem is that there just aren’t too many of them for sale. But buyers sure want them.  

 

Leave a Reply

Your email address will not be published. Required fields are marked *