We are less than a week away from our webinar “Seniors Housing M&A: the Numbers, the Deals and the 2017 Forecast,” where we discuss the results of our soon-to-be-released Senior Care Acquisition Report. Prices have risen to new heights in skilled nursing, nearly surpassing $100,000 per bed at $99,200 per bed. But what happened to skilled nursing cap rates, which most buyers prize far more as a valuation tool than price per bed? In the last couple of years, it has remained remarkably stable at 12.2% (identical to its 2015 level), with just a 20 basis point variance over the past three years.
Although not reaching the record-low from the last bull market (12.1% in 2007), skilled nursing has grown more and more enticing to investors, despite its many risks. Adding to its appeal is that the 10-year Treasury Rate sunk to record lows in 2016. With cap rates remaining relatively high, a buyer can achieve an unlevered cash-on-cash return of between 12% and 13%, if the facility’s operations improve or even stay unchanged. When a typical 65% to 75% debt ratio is applied, and with debt costs so low, the levered return can be above 20%. But we digress. To hear more analysis on the skilled nursing (and seniors housing) markets, tune in on Thursday, February 23 at 1pm.
