For the first time in our Senior Care Acquisition Report (with the 23rd Edition just published), we decided to take a look at how investors priced in the risk purchasing a newer seniors housing community, versus an older one. As many of you know, the assisted living product did not develop in earnest until the 1990s, when at the end of the 20th century, the industry experienced a boom in development, mostly on the assisted living side. Since then, the tastes of seniors have changed, and what may have been a luxury “A” property in 2000 may not be one now.

We have also more recently undergone a development boom, once again primarily in the assisted living/memory care sector. Many of these new communities are top-of-the-line and feature high-end finishings and a host of amenities. Investors, not surprisingly, priced less risk into those brand-new communities, despite their higher initial cost, with the average cap rate for properties built less than 15 years ago at 7.2%, while those communities opened before 2002 traded at a 7.8% cap rate, on average. The difference isn’t stark, but it can bump a purchase price up by a few million, or more.