Every quarter, we take a look at the latest 12-month pricing multiples for the assisted living, independent living and skilled nursing markets as an added bonus to the Senior Care Acquisition Reports. Starting with assisted living, the market appears to have rebounded after the drop in value recorded in 2018. From 2018 to the four quarters ending on June 30, 2019, the average price paid per unit rose from $186,400 to $205,900, a 10.5% increase. The jump was smaller when comparing the four quarters ended March 2019, when we recorded an average price of $204,000 per unit. That market, which includes memory care communities, suffered from the woes of overdevelopment, not only affecting occupancy in affected areas but also exacerbating the scourge of staff turnover. It appears development has slowed, so there may be fewer distressed targets in 2019.
That does not mean buyers are any less cautious buying in the assisted living market, at least according to the average cap rate, which rose to 8.3% in the 12 months ending June 2019, from 8.1% in the previous four quarters and 8.2% in calendar year 2018. It is important to note that interest rates were higher in that 12-month period, coming before the most recent Fed decisions and ultimate rate increase. But given the difficult operating environment in seniors housing today and amount of time before demographics truly make a difference in the industry (late-2020s, at the earliest), a little caution is a good thing.
