In a year when both the assisted living and independent living average cap rates rose, how did the sectors’ average Gross Income Multiples (GIM) change year over year? Well, they accordingly fell off their 2017 levels, mirroring their changes in cap rate, according to The Seniors Housing Acquisition & Investment Report.
The average independent living GIM fell to its lowest point in five years at 5.0x, while the assisted living GIM dropped 70 basis points to 3.2x, also a five-year low. The difference between the sectors can be explained by the higher risk of owning assisted living communities. The IL market, on the other hand, has seen far less new construction and more stable occupancy levels as a result.
The assisted living communities sold in 2018 were also on average of a lower quality than the previous year, leading buyers to leave more margin for error in their investments. The gap between independent living and assisted living GIMs shrunk 20 basis points to 180 basis points, but equals the levels of both 2016 and 2015. However, it should be noted that several portfolio sales did not have a disclosed GIM.
