The Price of Age in Seniors Housing

Largely, the relationship between the age of a seniors housing property (including assisted and independent living) and the average price per unit is a near-perfect correlation, as the newest communities tend to sell at higher prices than the older ones. That was not the case in 2016, which saw its oldest properties jump in price and its newer ones fall, compared with 2015. Communities built earlier than 2001 (the tail-end of the assisted living building boom) sold for $179,900 per unit, up from $153,800 per unit in 2015, according to The Senior Care Acquisition Report. The anomaly of the year occurred in the group of properties built between 11 and 15 years ago, which sold on average for $272,100 per unit in 2016, a $132,800 increase from 2015’s $139,300 per unit. There were a few high-priced portfolio deals in this category that heavily influenced this significant jump in price. With an increase in the overall average price per unit for seniors housing year over year, one would assume that was driven by the sale of new properties. While that may be true, properties built between six and 10 years ago fell in value from $225,100 per unit to $180,500 per unit, and properties built in the past five years dropped from $320,500 per unit to $303,200 per unit in 2016. So rather than the increase in the seniors housing average price per unit being driven solely by the brand-new communities, age appears not to have mattered as much to investors as the property’s location, size and operations. It is important to note that not all ages take into account renovations (and they would have to be substantial renovations and/or gut rehabs to change the effective age of the building) or additions (often of memory care units). Despite the abnormalities of 2016, it is generally true that to better compete in today’s senior living market, investors want the best bones they can buy.