There are plenty of issues that come along with the aging of the skilled nursing facility inventory. Older facilities require more capex to keep operations up to snuff, have trouble attracting the coveted Medicare and private insurance patients, and often have far fewer private units but more three- or four-bed wards. In addition, it has to be more difficult attracting and retaining staff at an older facility, especially when a newer facility often comes with more bells and whistles in addition to newer technology that makes those employees’ jobs easier. Where would you rather work?

So, in the M&A market, how did those older facilities fare compare with the newer ones? Well, there was a perfect correlation between the age of the facility sold and the average price per bed paid for it in 2018, according to our newly released The Skilled Nursing Acquisition & Investment Report.

Understandably, older skilled nursing facilities went for the lowest prices, averaging $76,100 per bed. That is remarkably close to the average for the 2018 market as a whole (at $77,500 per bed, but representing 48% of all facilities sold in 2018, they clearly had an outsized effect on that average. In addition, the age was unidentifiable for several large portfolio sales, and numerous facilities have received renovations that would have lowered their effective age.

The next group of facilities, built between 20 and 40 years ago and representing 46.5% of the properties sold, sold on average for $88,100 per bed, or about $25,000 higher than in 2017. The last group of facilities, built after 1998, represented just 5.5% of the M&A market but rightfully commanded the highest average price of $109,900 per bed. These facilities are not only newer, but are often not Medicaid certified and feature larger or often more private rooms, and sometimes even have an assisted living wing, which would drive their prices up. As we noted, there were several large portfolio sales whose age could not be determined.

Operations, not age, matter the most for investors buying skilled nursing facilities, but newer facilities require less capex, usually attract higher paying patients (plus staff from local competition) and are better equipped to handle the more care-intensive patients of the future.